So you are going through a foreclosure and are unsure of what avenue to take in order to keep your home; refinancing or loan modification? Below, details what is required in order to successfully pursue either option and then you may have a cleared understanding of what choice would be better for you.
First, a homeowner facing foreclosure needs to determine how much equity they have in their home, if refinancing is your goal. What home equity means is simply the current market value of the home minus the outstanding mortgage balance. In order to qualify for refinancing you must have at least ten percent equity in your home. Unfortunately, if you have less than ten percent equity in your home or none at all, loan modification will automatically become your best option.
Additionally, if you would like to refinance your home to stop foreclosure banks are going to want you to have a good credit score (or at least an average one at best) because they will automatically assume you are a default risk if in foreclosure. Which can present a catch-22 for some homeowners.
Chances are if you are already in foreclosure your credit scores have already been affected. Refinancing is a viable option when you are only 1-3 months behind. Research has shown that there are refinancing options for homeowners with poor credit, these options are not as plentiful as they once were but the terms of these loans are usually not much better (and in some instances a lot worse) than the current loan you are trying to get away from. Again, if this is your current situation, loan modification may be the best alternative.