For many people across the country, being unemployed and underwater on their mortgage appears like a never ending hole. Not only are you unemployed, but you owe more than your house is worth. Although recently the housing market has begun stabilizing, there are still countless people who are in financial distress due to unemployment and owing more on their mortgage than the house is worth. If you are currently in this financial dilemma, do not despair because there are options available to help alleviate both problems.
Dealing with Unemployment
Losing your job and struggling to make your mortgage payment often go together if you haven’t set aside a savings cushion for emergencies like this. If you were living on your full salary before, living on reduced unemployment benefits certainly is going to result in making ends meet even more difficult, let alone making your mortgage payment every month.
However, if you are facing these dire circumstances, you may very well be in a position to obtain housing relief. A government backed program called the Home Assistance Refinance Program (HARP for short) allows you to restructure your existing loan into a new loan with a lower principal balance along with a lower interest rate.
HARP can give you a monthly mortgage payment that works well within your budget if you are unemployed. Apply today with your lender, explain your situation and get the ball rolling on a completely modified loan.
How to Deal With Underwater Mortgages
First and foremost, it is important to understand the definition of an underwater mortgage. When you are underwater on your mortgage, it is defined as owing more on the original principal balance of your loan that the house is actually worth. The housing crisis that lasted from 2007-2012 caused housing prices to plummet causing millions of borrowers to owe more than the actual value of the home. Although the housing market continues to stabilize, it has not reached a point where the millions of borrowers who were underwater have reached positive equity in their home. That is where a couple of government backed programs can help.
We’ve already spoken about the Home Assistance Refinance Program (HARP), which is specifically tailored to borrowers who are underwater and unemployed. The government provides incentives to lenders who will restructure an existing loan into an affordable loan if the borrower meets the criteria outlined. However, it is important to keep in mind that final approval lies in the hands of the lender and the government has no say in regards to approving the refinance program. Do keep in mind that the lender wants the home off their books if they are losing money, so chances are quite good that the refinance program will be approved.
The next program is called the Home Assistance Modification Program (HAMP for short). This government backed program works with borrowers who are not only underwater on their mortgage but facing default and potential foreclosure. If you are in this situation is highly recommended that you apply for the HAMP in an effort to obtain an entirely new loan with a new rate and term. It is essentially a win-win situation for both the borrower and the lender. Again, final approval is up to the lender, but they would rather modify a loan than to have a foreclosed property sitting on their books losing money month over month. It costs the bank thousands upon thousands of dollars to maintain a foreclosed property. That is why the HAMP program is your best bet for a full modification before you lose your home. Talk to your private lender today about the HAMP program
Short Sales
The next alternative for borrowers who are underwater and unemployed is known as the short sale. In this scenario, the bank allows you to sell your home if you are underwater for far less than the principal balance that is currently owed. In this instance, you are alleviated from your financial obligation on the home, the bank continues to make money and the buyers of your home are able to buy a piece of property for pennies on the dollar. A short sale is a great tool that helps keep your credit in check and avoid full bankruptcy. Again, talk with your lender about a short sale if you are unemployed and underwater on your mortgage.
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