If you are underwater on your home mortgage, contact your lender. Some banks run their own in-house refinance programs to help borrowers in this situation. Many attempt to qualify homeowners for the president's Home Affordable Refinance Program (HARP). If your loan is owned or guaranteed by Fannie Mae or Freddie Mac, your lender must assess your eligibility for the program, according to the Making Home Affordable website. While many major--and smaller size--banks do participate in HARP and other Making Home Affordable schemes, they do not have to. Effective Sept. 7, 2010, the Federal Housing Administration (FHA) offers a "short refinance opportunity" for eligible underwater homeowners, HUD reports. The FHA as well as the Department of Veterans Affairs offer other options that might work for underwater borrowers presently invested in one of their products.
Don't confuse a refinance with a modification. Under a modification,
your lender "modifies" the terms of your current loan to make the monthly payment manageable. A refinance actually transitions you out of your present loan to a product with better terms and greater stability.
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