Many homeowners who need help with mortgage loans are finding it difficult to get relief. A Federal Reserve study found that about 2.3 million homeowners who could have been helped by refinancing in 2010 were unable to because of strict lending standards.
Almost a quarter of U.S. homeowners are underwater on mortgages, making it impossible to get refinancing. Mortgage lenders are unwilling to lend to borrowers who don't have equity in their homes. Not being able to refinance means that many people are not able to take advantage of low mortgage rates. Not having much equity also means some homeowners are unable to sell their homes to relocate.
If you are underwater on a mortgage but need help, contact your loan servicer to discuss your options. Also, the government is reviewing the Home Affordable Refinance Program (HARP) to see if it can be expanded to help more homeowners.
But while some borrowers aren't having much success refinancing, other homeowners are managing to get mortgages. In some cases they may be put through a tough underwriting process that requires documentation for income, savings and other assets.
Credit scores matter
For homeowners who still have home equity, refinancing could be a possibility if they have good credit. Many mortgage lenders are looking for people to have the best credit scores before approving them for a loan. A credit score above 720 is usually required to get the best mortgage quotes.
Older borrowers and mortgages
Seniors living on fixed incomes may be especially challenged by making mortgage payments. One option for people 62 years and older who have some home equity is to get a reverse mortgage. Instead of refinancing and making payments on a mortgage each month, a reverse mortgage allows you to access some of that equity without having to pay it back right away. Money borrowed through a reverse mortgage is due when you move or die. Proceeds from a reverse mortgage can be received as a lump sum, through installments or as a line of credit.