A foreclosure bailout loan is designed to halt a foreclosure by refinancing the entire balance of the existing loan. Bailout loans generally come from lenders who are willing to overlook recent late or missed mortgage payments to provide you with a new mortgage to start over.

These are non-traditional mortgages offered by lenders who often charge higher interest rates because they believe these borrowers might not be able to keep up with payments.

Meanwhile, when you are facing a foreclosure, you have just two options to keep your home. First, you could pay all past due balances which is often not possible and the lender may still proceed with the foreclosure anyway. Your last option is to find  a foreclosure bailout loan which we can help you with.

Foreclosure Bailout Loan Key Points

This is what you can expect from a foreclosure bailout loan:

1. Higher interest rates than a conventional loan
2. No penalty for having missed or late mortgage payments from your prior loan
3. Limit to the debt to income ratio
4. Ability to qualify without tax returns
5. No prepayment penalty so you can refinance in the future

Click to speak with someone about your situation today.

Applying for Foreclosure Bailout Loans

Applying for a foreclosure bailout loan can seem complicated at first, but it is just like any other loan process with some additional specifics that need to be addressed due to the unique circumstances of the homeowner.

Documentation

The first vital step in getting a foreclosure bailout loan is gathering extensive documentation. This typically includes:

• Income verification: Lenders will want to see proof of your income, such as pay stubs, W-2 forms, and tax returns. There are also options for this loan without income documentation.
• Tax returns: Your recent tax returns will give the lender a clear picture of your financial situation.
• Current Mortgage Statement: The lender will ask you to provide a copy of your current mortgage statement
• Property appraisal reports: These reports help lenders assess the value of your property and determine if it meets their requirements.
• Proof of insurance: Every mortgage will also require homeowner’s insurance. We will require you to provide a copy of your declaration page.

This thorough documentation process allows lenders to evaluate both your financial capacity and the value of your property. It helps them understand if you’re in a position to repay the loan and if the property serves as sufficient collateral.

Appraisal and Title Work

Following the documentation stage, an appraisal and title work are conducted to provide further insight into the property.

• Appraisal: This involves a professional assessment of the property’s current value. The appraiser will examine various factors, such as the condition of the property, recent comparable sales in the area, and any unique characteristics that could affect its value.
• Title search: A title search is performed to uncover any outstanding liens or claims on the property. This step ensures that there are no unresolved issues that could affect the lender’s stake in the property.

These steps are important for both the borrower and the lender. For borrowers, an accurate appraisal determines the maximum allowable loan amount for the property, while for lenders, it safeguards their investment by ensuring the property’s value matches or exceeds the loan amount.

Credit Score Requirement

Another essential aspect of securing a foreclosure bailout loan is meeting specific credit score requirements. While traditional mortgage lenders typically seek higher credit scores, alternative lenders providing foreclosure bailout loans may accommodate lower scores.

Lenders generally expect borrowers to have a minimum credit score, often around 620 or higher for this type of loan. Additionally, presenting substantial home equity is usually required. The typical equity requirement is at least 25% of the property’s value. These criteria help mitigate risk for lenders and provide assurance that borrowers have a significant stake in their homes.

Loan to Value Ratio Requirements

We are able to help refinance your home to stop a foreclosure, but the loan to value ratio will be limited. If your current loan balance is very close to the value of the home, you may not have an opportunity to refinance.

The loan to value ratio requirements will vary based upon the following:

1. Credit scores
2. Property use (primary residence, second home, investment)
3. Rate and Term Refinance vs Cash out Refinance

The loan to value ratios can be as high as 80% and as low as 60% depending upon the mix of factors referenced above. Give us a call to discuss so we can help you to find a way to refinance. Contact us here to discuss.

Refinancing with Late or Missed Mortgage Payments

One of the challenges when refinancing to stop a foreclosure is most individuals have late or missed mortgage payments.  The late or missed payments will disqualify you from being approved for a conventional, FHA, VA or USDA loan.

The foreclosure bailout loan guidelines will allow for the poor mortgage payment history. It is understood that people who are facing foreclosure obviously have mortgage payment challenges. This type of loan may be your only hope in being able to refinance.

The loan can also be used to purchase a new home immediately after your prior residence was foreclosed upon.

Evaluating Foreclosure Bailout Loans

When considering a foreclosure bailout loan, you should conduct a thorough financial assessment. Start by estimating the total cost of the loan, which comprises interest rates, fees, and potential penalties. This is a key step as it allows you to compare the overall expense with your current financial standing and discern whether it aligns with your long-term repayment capabilities.

Assessing the total cost necessitates seeking detailed information about the interest rate associated with the loan. On average, foreclosure bailout loan interest rates are higher than conventional rates. By comprehending this figure, you can calculate the additional payments over time to gauge if they are sustainable within your budget and how it lines up with your current  mortgage payment.

When facing the potential loss of your home, it’s important to consider all available options. Loan modification is one such avenue, involving negotiations with your lender to alter the terms of your existing loan, making it more manageable. This could entail reducing the interest rate, extending the loan term, or incorporating missed payments into the loan balance. It’s a suitable approach if you aim to retain your home and can sustain a modified payment plan.

Keep in mind that if your lender already began the foreclosure process, asking for a modification may not work.

Your other alternative is to sell the home and take any equity you may have. Then, you can start over in a new home. If this is the avenue you would like to investigate, we can help guide you and provide you with the financing needed.

U.S Government Assistance Programs

How does a foreclosure bailout loan help homeowners facing foreclosure?