Loan Modifications and FHA Refinance What Is The Deal

Loan modifications are complicated products. It does require some understanding about how they work and what options you have when trying to modify them. Two options homeowners have to protect their homes are loan modifications and FHA refinancing.

Contacting a qualified financial advisor is always a great idea if you are struggling to understand what your options really are. Remember however that often free help is better than paid consultants that can financially from decisions you make through commissions and kickbacks.

The Government is investing heavily in public (that means free) counseling offices that provide homeowners with the best options.
Whatever your choice is, it is a good idea to understand as much as you can about loan modifications and FHA refinancing. Understanding the basics of loan modification and refinance before you talk to a qualified consultant will help you make an educated decision based on his advice.

So which is best for you?

A loan modification or an FHA refinance. Which is best for you might very well depend on who insures your loan.
You need to ask your lender or service provider (not always the same) who insures your loan, Freddie Mac, Fannie Mae or the Federal Housing Administration (FHA). These insurers are authorized by congress to insure home loans. This allows banks to provide low interest rates to high risk borrowers which enables borrowers in trouble to still get a fair interest on their mortgage, modify or even refinance their home. If your mortgage is insured by Fannie, Freddie or FHA your lender is pretty much safe and should be happy to modify or refinance your home.

If your mortgage is insured by Freddie or Fannie then you should apply for Making Home Affordable mortgage aid. There is no real difference between the two of them, they are based more on the location of the borrower than any other significant factor.

If you are insured by FHA you are eligible for the Hope for Homeowners plan. These plans allow borrowers that previously did not qualify for loan modification or refinance to now be accepted, so even though you didn’t qualify in the past apply again and you might get a pleasant surprise.
Making Home Affordable loan modification plan is designed to reduce monthly payments and stabilize the expenses of borrowers in trouble until they can get a hold of their finances. It is very regulated and fine tuned to provide the specific results the administration is looking for. There are some clever incentives both for borrowers and lenders to encourage loan modifications and paying them on time.

If you are insured with FHA you cannot apply for a Making Home Affordable loan modification but there are other options, some of which are more flexible and can adapt better to your personal circumstances.

Visit a government counselor for free and ask for your best options. It is a good idea to check the website of the program you qualify for to be prepared for what paperwork you need.

Most importantly don’t trust your loan modification to a loan modification company without understanding what they are doing and the effects it will have on your home and credit score.