It is most unlikely that anyone would sign a mortgage contract with the intent to default on the loan. However, sometimes life throws a curve, or the pitch comes in a little hard and fast, and things begin to pile up which can force a homeowners into facing a possible foreclosure. The good news? There are some things that can be done that will help to avoid foreclosure.
First, you need to know who holds the mortgage and stay in touch with your lender. Today, that can be difficult when the mortgage is sold and resold over the course of time. But you should be persistent. Start with the first contact you have - where you send your payments. Remember, the lender is actually an ally because they really would rather you keep making payments on your mortgage rather than defaulting into foreclosure. Second, at the beginning of the difficulty, you need to communicate with your lender about the options that may be available. These options may include: - setting up a repayment plan with lower payments to help get through the rough spot, and then resume full payments when the situation has been resolved.
- lowering interest rates
- renegotiate the terms of your loan by lowering interest rates, lengthening the amortization schedule, or even rolling any delinquent amount into the loan before re-amortizing the loan.
However, if none of these alternatives are feasible, you may decide that you need to sell your home. There are two options for you should that be the case, a short sale or foreclosure. Exactly what is a "Foreclosure"? A foreclosure, including a Deed-in-Lieu of Foreclosure, means that your lender will take over ownership of the home and sell it to recover as much of the loan amount as possible. In essence, you walk away from your home. A foreclosure will negatively affect your credit score. In fact, your credit score could be reduced by approximately 250-280 points. Additionally, you may need to wait approximately 36 months before a lender will offer you a reasonable rate on a new mortgage. What is a "Short Sale"? – A short sale is often much more attractive than foreclosure. In a short sale, your lender agrees to accept a sales price that is less than the amount you owe on the mortgage. This is often done when the equity you have in your home is not sufficient to cover all the costs of selling. While you lose your equity, a short sale makes good sense since there will be a lesser impact on your credit score - often as little as an 80-100 point reduction. And, 18 months is usually a sufficient amount of time to wait before applying for another mortgage. As you can see, letting your home slip into foreclosure isn’t the best alternative over the long-term. Even though the short sale process may be more complex and involve a number of entities, it may well be your best choice. Find out if a short sale is the best option for you. If it is, I'll guide you through the process, and help you make the best decision for you and your family. Call me at 760-685-5471 or use the form below to send an email for more information. Bill |