Avoiding Foreclosure

Facing a foreclosure is tough, a lot’s happening all at once and it can be extremeley stressfull. You’re either trying to earn more income to get caught up, trying to find a job, or dealing with whatever issues put you in this position in the first place. But there are options our there that may help stave off a foreclosure, or at least, minimize the negative impact a foreclosure can have on your credit.

Here are a few options that can help:

FORBEARANCE

A Forbearance is when your bank allows you to resume payments of your mortgage, without immediately paying the total past due amounts owed, but your new mortgage payment may have a portion of the arrears added to it. It does mean your new payment may be higher than your original mortgage, but it sometimes puts you in a position to get out of the hole. This doesn’t always come cheap, though. Your bank may still charge you late fees, etc while you are paying the arrears and mortgage payment during this period. This plan works best for someone that can pay the higher amount for a time. An example of this can be someone that lost a job, got behind, found another job that pays the same income or more income than the previous job. It is not the best scenario for someone who’s household income is lower than before. You can struggle along and try, but it will not be fun. Your other bills will suffer, and ultimately so will your credit.

MODIFICATION

A Modification is when your bank modifies the terms of your loan from the original terms. The terms can vary from a) lowered rates; b) extended payment periods (say from 30 years to 40 years); etc. A modification is usually successfully approved when the homeowner can show an ability to pay, that the hardship has passed, and so on. Modifications are a long process, requires documentation of income and expenses, and are not always successful.

DEED-IN-LIEU

A Deed-In-Lieu of Foreclosure allows a homeowner to contact their bank and request an approval to basically “give back your home” to the bank without going through an actual foreclosure sale. But many homeowners are suprised when they have to submit income/expense documentation to get an approval from their bank to do this. The approval is based on almost the same documentation as a short sale. You have to show the bank, through your documentation, that you are really unable to continue to afford your home. Many a time homeowners are suprised when their lender denies them for a Deed-In-Lieu, and that can happen.

SHORT SALE

A Short Sales allows the sale of your house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the home owner can no longer make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what is owed, thereby walking away from a stressful situation.

Short sales are a viable option to avoiding a foreclosure and is usually the last option when a modification is unsuccessfull. Many homeowners are now considering a short sale as an alternative to foreclosure. If you are at the point where you have decided you no longer want to keep your home and you are upside down on your mortgage (unable to sell your home for enough funds to pay off the balance of your mortgage plus real estate fees and/or closing costs, etc.) or; if you are behind on your mortgage and would like to avoid a foreclosure then a short sale is a viable option. Keep in mind however, that a short sale can be a lengthy process, not because it takes a lot of time but because for some banks, there is a huge volume of requests for short sales and also a huge volume of foreclosures that banks are dealing with in this current real estate climate.

Banks will not consider, deny or approve a short sale without a contract on your home, so you will want to hire a good agent with Short Sale experience to help you through this process. There are specific documents the banks will need and a good experienced short sale agent can help you navigate through this process. Our company agents specialize in handling short sales and foreclosures. Call our office if you have any questions about a short sale or if you would like us to help you with the process.

These are just some of the options available to you, for a more complete guide on avoiding foreclosure, give us a call today.