Principal Reduction Programs For Underwater Homeowners

It's not secret that the United States housing market is on life-support. Millions of homeowners are searching for ways to stay in their houses. An issue that is growing uncontrollable are property owners who are underwater with their mortgages.

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Underwater Mortgages And Mortgage Principal Reduction

The value of a home may decrease for a variety of causes.

1. If a neighborhood begins to experience a higher crime rate, the property values slide.

2. If an area has a higher percentage of foreclosures compared to average, nearby home values eventually slide.

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3. Customers buying homes with no down-payment implies the home is 100% financed. This means the home has no equity right from the beginning.

Once the value of a home decreases, the word underwater is used since the homeowner now owes more than their house is now worth. A home losing it's value does not change your monthly payments.

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In case you are in this predicament. You have a number of choices.

1. Apply for a loan modification

2. A Mortgage principal reduction

3. Foreclosure or maybe short sale

Let's assume that foreclosure is not an option you want to take, let's look at one mortgage loan modification option readily available and the mortgage principal reduction program under it's umbrella known as Principal Reduction Alternative (PRA).

What Is PRA About?

Using this kind of program, a homeowner whose property is "underwater" may qualify to have their principal reduced on their overdue mortgage balance. The decrease would be a sum closer to the existing value of their home. This will also mean a lower mortgage payment.

How Would You Make Application For Mortgage Principal Reduction?

You cannot apply instantly. All property owners must first apply for a loan modification under government home loan modification rules. Lenders are then expected to evaluate if a home-owner is eligible for a principal reduction under PRA.

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What Actions Must You Take?

First, long before you are sanctioned is the application process. Here are just a few of the qualifications required. Talk to an attorney or a loan modification service for details and comprehensive information on other requirements.

You owe more than your home is worth.

Your mortgage isn't owned or guaranteed by Fannie Mae or Freddie Mac.

If you are not residing in the home you will need the loan modification for you are not qualified

Your home mortgage should have been obtained on or before January 1, 2009.

Your mortgage payment cannot be under 31 percent of your gross (pre-tax) monthly income.

Must verify financial difficulty

Second, in case you are confident you can meet the above qualifications your next step will be to contact your lender. Tell them you wish to make application for a loan modification under the government guidelines.

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Thirdly, your lender will offer you further detailed information regarding documentation and an application.

Follow-up

You must constantly contact your lender along the way to make sure everything is in order and nothing is lacking. It is a lengthy process that will require you to be the "squeaky wheel" always.

Loan Modification Services

The application process all the way to the sanction is lengthy. Missing one document can mean your application gets refused. A loan modification service has got a lot of experience in the area of mortgage principal reduction and can assist you from start to finish.

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