To find out if a loan refinance might be the right option for you to avoid foreclosure, let us help you learn about the basic steps to refinancing a mortgage.
Step One: Consider Your Reasons to Refinance
The first step to refinancing is carefully considering whether it is a good fit for your situation. One question you'll need to ask yourself is: what do I expect a refinance to do that will help me avoid foreclosure? If you know you are able to make some mortgage payment monthly but are unable to meet your current payment amount, then to refinance to achieve a lower monthly payment amount may fit your needs. If you are unable to make any monthly payments, regardless of the amount, refinancing is probably not the right route for you to take to avoid foreclosure.
You should also consider what change in your mortgage that refinancing could offer would have the greatest effect in helping you to make your mortgage payments so that you can decide what type of loan you want to come out of the refinancing process. For instance, do you need most to lower your interest rate? You will need to choose an adjustable or fixed interest rate, the length of time you will have to pay off the loan, and other mortgage terms when you refinance. Knowing what your situation really requires is the first step to making the right decision about refinancing your mortgage.
Step Two: Complete the Paperwork
The first document required to refinance your mortgage is generally an application provided by the lender. This will include questions to help the lender determine whether it will allow you to refinance your loan. The lender will require information about your current mortgage and how much you owe. You will also need to submit a number of documents to the lender, including a copy of your home deed, documentation of your income and expenses, a copy of your homeowner's insurance policy, and a list of all your accounts and assets. The lender will most likely run a check on your credit history as well.
Step Three: Determine Your Home's Value
Part of the process is getting an appraisal of your home to find out what the market value of your home currently is. Your lender will determine the valuation against which the loan will be offered. If this amount is lower than the amount that is required to pay off your existing mortgage, a refinance may not be the best option for you at this time. Once the value of your home is established, the lender will finalize the interest rate and present you with the formal loan documents.
Step Four: Final Steps and Loan Funding
The final steps to refinancing a mortgage are having a notary witness your signing of the formal loan documents, and then the actual funding of your loan. The settlement date of your refinanced loan is the date upon which your old mortgage will be paid off and your new mortgage will start. At this point, your mortgage refinance is complete and you have hopefully avoided foreclosure successfully.