Having your home in foreclosure is an uncomfortable, very negative feeling. It can feel like one’s financial means are slipping away slowly. For most homeowners, their home represents their ability to build wealth, have a secure place of their own to live, and to have a center around which to raise a family.

To enter into foreclosure, of course, you have to be behind on your mortgage payments for at least 2-3 months. People can get into a foreclosure situation for a number of reasons – most of which have to do with having limited cash flow. Losing one’s job, dealing with unexpected medical expenses, and having other issues crop up in life can make it nearly impossible to pay for one’s own mortgage.

One way out: refinancing. But, many lenders will balk at a refinance, especially if the home is “underwater” (i.e., it is worth less than the amount of the outstanding mortgage balance) – making selling the home not an option as a way to pay off the debt.

If you are saying to yourself, “I’m in foreclosure and I need to refinance,” here are 5 tips for what to do next:

1. If you are merely late on payments but not in foreclosure, get refinancing going soon:
If you are just a bit behind in payments but have not advanced into the foreclosure stage yet, consider a loan modification program. For example, if you have a Freddie Mac or Fannie Mae-backed mortgage, you may qualify for their Home Affordable Modification Program (HAMP).

This program helps homeowners who are late on their mortgage payments; note that certain restrictions apply. The program reduces the borrower’s monthly payment amount so that the mortgage payment does not exceed 31 percent of monthly income.

2. For people already in foreclosure, consider the Home Affordable Foreclosure Alternatives Program:
If you have advanced into foreclosure and have a Freddie Mac or Fannie Mae-backed loan, you may qualify for a Home Affordable Foreclosure Alternatives Program (HAFA).

This program allows the borrower to sell their home for an amount less than what the mortgage is currently worth (this is called a short sale). The proceeds can be used to pay off the loan. Or, if the house cannot be sold, the homeowner may qualify for a deed-in-lieu, meaning the home’s deed can just be transferred back to the lender and the debt is forgiven.

3. Loan modification is the way to go if you need to reduce your payments:
What if you do not have a Freddie Mac or Fannie Mae loan? You still may be able to qualify for loan modification. In this case, the servicer (lender) may choose to help the borrower sell the house via a pre-foreclosure sale. Or, a short sale (as described above) may be possible.

4. Ask your lender about a “short refinance”:
Another options is to ask your lender about a “short refinance.” In this case, the lender agrees to refinance the home for a new principal loan amount that is less than the previous/current one, thereby forgiving some of the debt. The new loan may also be offered at a lower interest rate.

5. As a last resort, consider a hard money loan:
Finally, in some cases, the borrower may seek out what is called a hard money loan. This is where a private individual – either a family member or another individual – loans the family money (often at a high interest rate) for the short term so that they can get back on their feet and keep up their payments.

Consider these 5 tips for what to do if you are in foreclosure and need to refinance your home loan.

Author Bio: Find out more about home mortgage refinancing options at: Home Mortgage Refinancing Options.

Category: Finances
Keywords: In Foreclosure And I Need to Refinance,5 Tips on refinancing your home, avoid foreclosure