You may be facing foreclosure…
so what are your options?!? Try to look
at the situation more from a financial standpoint rather than an emotional
standpoint. This way you can more
successfully analyze which option might best suit your needs and desires to move
you towards resolving your financial difficulty. One very important thing to remember: Time
is of the essence. Take time to
think through your situation and make a decision. Then, take action right away so you have enough
time to complete the solution you choose.
Nine options when facing Foreclosure
1. Short Sale –A
Short Sale can be negotiated with your lender by your Real Estate Professional
if what is owed is MORE than the property’s value. The impact on your credit is
much less severe and often times you can get a full release from the remaining
debt after the sale. Short Sales typically allow for you to purchase a new home
within 2-3 years where as a foreclosure could impact you for 7 years.
2. Payoff/Refinance – Completely paying off the entire loan amount plus any default amount
and fees. Usually this is accomplished
through a refinance of the debt. New
debt is at a normally higher interest rate and there may be a prepayment
penalty because of the recent default.
With this option, there should be equity in the home.
3. Reinstatement – Paying the entire default amount plus interest, attorney fees, late
fees, taxes, missed payments and fees.
4. Loan Modification – Utilizing the existing mortgage company to refinance
the debt or extend the terms of the loan.
This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you
have fixed the problem that caused the late payment.
5. Forbearance –
Lender may be able to arrange a repayment plan based on the homeowner’s
financial situation. The lender may even
be able to provide a temporary payment reduction or suspension of payments. Information will be required from the lender
to show that you are able to meet the new payment plan requirements.
6. Partial Claim – A loan from the lender for a 2nd loan to include back
payments, costs and fees.
7. Deed in Lieu of Foreclosure – Give the property back to the bank instead of the
bank foreclosing. Banks generally
require the home be well maintained, all mortgage payment and taxes must be
current. Most loan applications ask if
this has ever happened.
8. Bankruptcy –
This option can liquidate debt and/or allow more time. I can refer you to a qualified bankruptcy
attorney for a free consultation.
9. Do Nothing –
If a homeowner does nothing, they most likely will lose their home at
foreclosure auction. Loan applications
generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging
information. Not the best option.