Save My Home

When attempting to refinance to avoid foreclosure and save your home, very often your credit cannot be considered for the purposes of qualifying for the loan, either because your credit score is below 500 or you have received a notice of default or are 90+ days late on your mortgage. For this reason, all lending decision made by the investor or lender who helps you refinance are based on the property value first.

Property values are so important in refinancing to save your home that investors will often require 2 or more valuations before finally agreeing to help you. This is because when they can't rely on your credit score to help them make a lending decision, they must rely on the value and condition of your property, because if you default again, they need to know they can recover their investment.

A popular type of property valuation, used in almost all refinance transactions, is an appraisal. You probably had an appraisal conducted when you purchased your property, or the last time you refinanced it. In a full appraisal, a state licensed and certified professional whose specialty is in valuing homes will visit your property, inspect it inside and out, and take photographs, measurements and other key information about the property. The appraiser will then look at sales of comparable properties throughout the neighborhood to help him develop a value for your home. A well written and researched appraisal from an experienced appraiser can be the difference between saving your home and losing it, so work with your refinancing specialist to identify an appraiser who really knows the neighborhood well and has a clean administrative and disciplinary record with his licensing body.

Broker Price Opinions, or BPOS, are a very common "appraisal review" which lenders use to determine whether or not a particular appraisal is accurate. In a BPO, a real estate agent, broker or realtor will be asked by the lender to visit your home and to give their opinion of how much it might sell for in 30 days and then again how much it would sell for in 90 to 120 days. The 30 day "quick sale" value is generally the figure which most investors will look most seriously at, because if sales are very slow in your neighborhood this number can be much lower than the 90 to 120 day number, which means that it may cost them quite a bit of money to dispose of the property in the event of a future default. Some BPOs have interior photos taken, some are just "drive-by" appraisal, but all of the develop their property values from comparable sales in the neighborhood. Noticing a trend here?

When you first begin looking into saving your home, we may decide that it may be advisable to run an AVM or Automated Valuation Model appraisal. This is a computerized process by which comparable sales in your area are combined with your square footage and other factors to determine what your home might sell for. AVMs are notoriously reliant on the accuracy of public records of title recorded in your county courthouses, but can help you identify discrepancies in square footage or the number of bedrooms and baths reported for your property, as well getting a ballpark estimate of the property value you may expect to receive, before spending money on more expensive appraisals or BPOs.

Property value is one of the most important factors in determining whether or not you can save your home from foreclosure, but just as important is the current condition of the property. If your property is poorly kept, the appraiser may indicate that you have substantial cosmetic deferred maintenance. If your home's interior or exterior has broken fixtures, windows, frames, siding, or other cosmetic items which could stand a coat of paint or some spit and polish, be sure to dress them up for the occasion prior to an appraiser or realtor showing up. Cosmetic deferred maintenance in excess of a few hundred dollars will indicate to the investor that you lack pride of ownership, which we define elsewhere in this article, and may prevent you from obtaining the mortgage refinance you need to save your home.

A well written letter of explanation often is required as well. You will be asked to explain the circumstances that caused you to fall behind on your mortgage obligations. You will also need to explain how you have remedied your financial situation and why you feel you will be able to make timely payments on your new loan.

Saving your home from foreclosure begins when you first realize you may be forced to miss a mortgage payment. When times get tight, make your mortgage payment your first priority, over your car and your credit cards. Good mortgage history can help you refinance and consolidate all of your high interest bills, but missing mortgage payments is a sure fire way to run the risk of foreclosure.

If you are trying to save your home and need to work out a payment plan to get your mortgage current with your lender you will most times need to talk to the loss mitigation department. This may take a little effort since most calls will be routed to the collections department who normally will just demand you pay or else.

In some cases, you may be better off refinancing your present Loan which is in default as opposed to doing a workout with your present lender. By getting a new loan, you relieve the pressure surronding the foreclosure process.

» DISCLAIMER: The information contained in this article on 'Save My Home' is a collection of contributions by licensed mortgage professionals and is not the opinion of Broker Outpost LLC. Always consult a licensed professional before applying for a mortgage.