If you owe more than your house is worth, you might say "upside down" or "under water." And you are not alone. Before you resolve yourself to foreclosure and walk away from your home, consider some of the following options.
Loan Workout/Loan Modification/Loan Rework--Banks are becoming more willing to do loan workouts, also called loan modification or loan reworks. Banks are not in business to sell homes. They would much prefer that the homeowner stay in the home and pay their mortgage. Even if you have received a foreclosure notice, there still may be time to save your home and your credit. Below are the different options for reworking your loan:
1. Loan Reduction. This is simply a process by which the lender reduces the amount you owe on your home. If you can show proof that homes like yours in your area have recently sold for less than what you owe on your home, the lender may agree to lower your loan amount. Lower loan amount equals lower the monthly payments. To get started, call your lender and ask for the loss mitigation department.
2. Extension. This loan modification (also handled by your lender's loss mitigation department) extends the term of your loan. Your payments are lowered and spread out over a longer period of time.
3. Interest Rate Reduction. This option is especially favorable if you have an adjustable rate mortgage that has risen so high that your payment is no longer affordable. Often, the bank would rather reduce the interest rate than foreclose.
NOTE: DO NOT, at any point, stop communicating with your lender. This makes them more likely to move forward with foreclosure proceedings.
Forbearance
If you are a couple of payments behind, but are expecting a lump sum of money (yearly bonus, insurance payout, or tax refund) that will catch you up, consider requesting a forbearance. The lender agrees to allow you to temporarily stop making payments. But you must bring the payments up to date by a specified date and start making your payments at that time. Resuming the payments is called reinstatement.
Repayment Plan
This is a plan that your lender agrees to, where you make your monthly payments and add on a little extra. The extra amount will be applied to your overdue balance.
Rent/Lease Your Home
If you have no hope of being able to pay your mortgage, you may be able to rent out your home. There are a lot of people who are looking for a home to rent. If the house will not rent for enough to cover your payment, it will probably be worth making up the difference yourself. You can find a cheap place to rent in the meantime. These are hard times, and it won't be forever. Once housing sales recover, sell the house then. You may even make a little money on it.
Short Sale
If you've been devastated financially, you may not be able to pay for your home at all. A short sale may be the best way to avoid foreclosure. In a short sale, the house is put on the market at a price that is less than you owe. Sometimes the bank will accept the reduced amount. Other times, they will expect you to pay part of, or all of the difference. They will work out a payment plan for you to pay them the shortage.
Loan Assumption
If you have a reasonable interest rate and loan amount, you may be able to sell your home to a buyer that can assume your loan-that means they take over the payments for you. Work closely with your lender on loan assumptions. Scammers have tricked some into thinking their loans are being assumed. In the end, the sellers gave up their homes but still owed the mortgage.
Deed in-lieu-of mortgage
A deed in-lieu-of mortgage is one step above foreclosure. This is a process by which you voluntarily surrender the home to the lender. A deed-in-lieu-of mortgage is less damaging to your credit than a foreclosure.
A foreclosure on your record says that you breeched a legal contract on life's most important financial obligation. It further says that you breeched it in a way that forced the bank to sue you. It gives the impression that you are not honest.
Foreclosures follow people for years, even for the rest of their lives. Once you lose your home, you will need to live somewhere. When you apply to rent property, the landlord will probably check your credit. Did you know that employers often check credit before hiring or promoting? Knowing that a foreclosure on your credit makes you look dishonest, do you want that on your record?
Foreclosure should be avoided at all costs.
Learn from Lyn Collier's years of Real Estate experience.
Read simple, to-the-point articles about avoiding costly mistakes and what to do if you owe more than your home is worth at http://www.e-home-mortgage-loans.com/index.html
Article Source: http://EzineArticles.com/?expert=Lyn_Collier
0 comments:
Post a Comment