You’re not alone. I’ve heard from hundreds of people about their interest rates coming up for adjustment on their 3, 5, 7 or 15 year interest only loans. The lower mortgage payments on these loans made them oh so tempting back when you were signing the note and deed on your home, but now the payment is about to, or already has, get or gotten really ugly. If you’ve tried to refinance in the past couple of years you’ve probably come across a problem or two, which leaves you unqualified for a much-needed refinance.
I’m sure a short sale or strategic foreclosure has crossed your mind but these should be done at an absolutely last resort. You may want to see if you can qualify for protection under the Housing and Mortgage Protection Act (HAMP). It’s a bit of a long shot but worth the try. If you qualify you could have a principle reduction or temporary lower mortgage payment applied to your mortgage. More than likely you are facing a lack of equity in your home or an ugly credit score.
Most of the recent legislation offering help to homeowners has applied to those with FHA home loans. With a conventional loan you are left out in the cold and facing a harder time qualifying for a refinance. You’re credit score as well as your credit history is two of the top few requirements to qualifying you for a refinance. Lenders are bumping their requirements on minimum credit scores thanks to incredibly low interest rates. It’s time to do everything you can to boost that score in the realm of the 700’s.
What to do:
1. Make all of your monthly mortgage payments on time - These types of late payments will not be received well by prospective lenders and are weighted more heavily than other types of late payments. If you are considering a short sale or foreclosure, WAIT! Let’s exhaust all other options first.