Millions of people are currently in foreclosure or contemplating ceasing to pay their mortgage and will be in foreclosure soon. In some cases, the threat of foreclosure leads to bankruptcy filing. Here’s the good news: your mortgage lender doesn’t want your house. But the bad news is they will take it unless you are proactively working toward a solution. Mortgage lenders have become the single largest property owners in the world. If you are in foreclosure or contemplating not paying your mortgage, there are options and choices you may consider.
Sell Your House
This is difficult for some in the current real estate market because many homes are worth less than what homeowners owe. In some regions of the country, even the most conservative borrowers who took out mortgages at 60% of the value of their home owe more than the home is currently worth. If you are one of the lucky few that owes less than you can sell your home for, selling now before foreclosure will have the least long term impact on your credit.
Short Sale
A short sale is selling your home for less than is owed and having all lenders agree to take less than full payment as satisfaction of the debt owed. Simply put, lenders write down what they are owed for a quick end to a problem. If they foreclose, it will cost them more time and money and they will likely sell it for less than you can. A short sale will have a negative impact on your credit. Depending on a lender’s method of credit reporting, the impact will likely be less than that of a foreclosure.
The problem with the above two options is you no longer own a home. Everyone needs to live somewhere. If you are in this position, your credit is likely less than perfect. There are very few mortgages currently available for anyone with less than perfect credit. Therefore if you sell your home you will be renting for some time. This may not be a bad option since in many regions of the country rent has decreased even more than home prices. However, you will need to move, pay first and last month’s rent, and may end up in a different school district. There are other options that can cure your foreclosure and allow you to stay in your home:
Filing Chapter 13 Bankruptcy
A Chapter 13 bankruptcy may stop the foreclosure of your home. If your bankruptcy petition is filed before the scheduled trustee sale date, it will stall the foreclosure, allowing you to propose a repayment plan and begin making mortgage payments again. There are downsides to filing bankruptcy, especically if other alternatives will work to stop foreclosure.
Refinance
By refinancing a loan that has adjusted, you may be able to lower your payments and stay in the home. However, the same issues regarding home values and amounts owed typically cause this option to fail.
Sale and Leaseback
There are a number of investors who are taking advantage of the greatly reduced prices and have started buying nice homes in nice neighborhoods. These investors are looking for good tenants. Advertising your home for sale with the tenant (you) already in place may allow you to avoid foreclosure but stay in the home.
Forbearance Agreement
Depending on the reasons for your mortgage default, a short term solution may solve a long term problem. If you lost your job and have been rehired, if an illness or pregnancy caused you to lose income and is no longer an issue, if you or a spouse was deployed and had reduced income, or any other short term event or circumstance such as divorce caused you to fall behind on your mortgage, lenders will often work with you to get you back on track with the original terms of the mortgage. This may involve a short term forbearance (no payments for awhile), adding the missed payments to the back of the mortgage, or a short term reduction in payment amount. These options allow you to stay in the home, keep the existing mortgage, and maintain a good credit rating moving forward.
Loan Modification
Most mortgage lenders have established departments to work with homeowners to modify the terms of their existing loan to allow them to afford to stay in the home. Every mortgage company has a slightly different method of managing and processing these modifications. Some mortgage companies will dramatically reduce interest rates. Others will extend amortizations (reducing minimum payment amounts) and some will even lower the principal balance owed. These mortgage companies have many people in various stages of foreclosure therefore dealing with them can be frustrating and intimidating. If you are well versed in real estate law and terminology, this is a fairly straightforward process. Many individuals may find this process very difficult and frustrating. For people looking for assistance with loan modification negotiation, please visit http://www.lendmethemoney.com/negotiating-lower-mortgage-payment.htm