Alternatives to Foreclosure
So, your house is in foreclosure… now what?!? Try to look at the situation objectively. If you can view the situation from a strictly business viewpoint, you will be able to more successfully analyze which option might best suit your needs and desires and help move you towards resolving your financial difficulty. One very important thing to remember: Time is of the essence, so sit and seriously give some thought to your situation and take action quickly, in order to allow yourself enough time to complete the chosen process.
Ten Options when Facing Foreclosure
1. Do Nothing – If a homeowner does nothing, they most likely will lose their home at a 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.
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 have a good income job and tax return.
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. However, both the lawyer fee and the court filing fee can be expensive. Bankruptcy can damage your credit for 7 years or more. When you fill out a credit application form or a loan application form, it is a big red sign to lenders.
9. Conventional Sale – If the property has equity (money left over after all loans and monetary encumbrances are paid). The homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale.
10. Short Sale – If your house value is less than what you owe to the bank, Short sale is the process to make the bank agree on a short payoff on their loans. Short sale could be the best option for home owners who are not qualified for loan modification or refinance. If the home value has decreased too much and home owners feel that it will take too long to recover, short sale is a also a good choice.
So, your house is in foreclosure… now what?!? Try to look at the situation objectively. If you can view the situation from a strictly business viewpoint, you will be able to more successfully analyze which option might best suit your needs and desires and help move you towards resolving your financial difficulty. One very important thing to remember: Time is of the essence, so sit and seriously give some thought to your situation and take action quickly, in order to allow yourself enough time to complete the chosen process.
Ten Options when Facing Foreclosure
1. Do Nothing – If a homeowner does nothing, they most likely will lose their home at a 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.
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 have a good income job and tax return.
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. However, both the lawyer fee and the court filing fee can be expensive. Bankruptcy can damage your credit for 7 years or more. When you fill out a credit application form or a loan application form, it is a big red sign to lenders.
9. Conventional Sale – If the property has equity (money left over after all loans and monetary encumbrances are paid). The homeowner may sell the home without lender approval through a conventional home sale. In this case, the homeowner will get cash from the sale.
10. Short Sale – If your house value is less than what you owe to the bank, Short sale is the process to make the bank agree on a short payoff on their loans. Short sale could be the best option for home owners who are not qualified for loan modification or refinance. If the home value has decreased too much and home owners feel that it will take too long to recover, short sale is a also a good choice.