If you are facing foreclosure there are a few things that you need to know.
Consult An Attorney
We are not attorneys and we cannot give you legal advice. Foreclosure is a complicated legal process whereby the owner of the mortgage on your house uses the legal system to get your house. Each state has different laws and so depending on the state that you live in the laws and procedures will be different. So We highly recommend that you consult an attorney.
Time Is Your Enemy
Every day that goes by without you making a decision is another day that takes you closer to losing your home. Time is your enemy so what you need to do is get educated really fast on the foreclosure process, how it works in your state and what your options are. Doing nothing is the biggest mistake that homeowners in foreclosure do. If you know your options then you can attack the problem head on and come up with a solution
Know Your Options
If you are facing foreclosure you have a few options. After speaking to thousands of people in foreclosure we find that the easiest way to illustrate your options is by following these questions that we ask homeowners in foreclosure. We will not comment on the legality or the ethical situation of each option (your attorney can help you with that) but will simply tell you the options and leave it up to you to decide which is best for your situation.
Do You Like Your Home?
This is the most important question. If you love your home and want to stay in it, if your kids love your home and if you are very happy with the neighborhood and the school system then it is much harder to walk away from your home. So if you really love your home and it works for you and your family then you need to try and fight to keep your home. In this scenario if you can get the bank to agree to a loan modification where they will reduce the interest rate on your mortgage that would be your best option. If your bank leaves the principal balance owed intact and changes the interest rate to a lower interest rate then if the bank agrees to modify your loan and you can afford this new payment then that is by far your best option. It is also a good option for the bank. However many loan modifications are denied. You need to prove to the bank that you can make the new payment and you might need to pay a little money to get caught up
Can You Afford Your Home?
Is your monthly payment manageable on your home or is it completely out of line relative to your income? Did you buy more home than you can afford? Did you get a variable rate mortgage and now your payments have sky rocketed? You might love your home but if you can’t afford to live in it and the bank won’t modify your mortgage then you have to face the reality that you are going to have to move. This is the hardest part for homeowners in foreclosure to acknowledge. But it is a reality and you are better off facing the reality head on than avoiding it.
Are You In Foreclosure?
If you are more than 90 days late on your mortgage then you are either already in foreclosure are you are about to be. If this is your situation then you are faced with essentially 3 choices:
- Stay in the home as long as you can and live for free (not commenting on the ethics of this choice but it is a reality that many people in foreclosure have to face.
- Fight the foreclosure using a foreclosure defense attorney (all this will do is maybe allow you to live in the home a little longer with a big emphasis on the word maybe.
- Leave your home
All of the above options will have the same negative effect. Ultimately you will lose your home and the bank will take the home from you via the foreclosure process. When this happens you will have a negative report on your credit which can impact your credit for up to 10 years. You need to look at your personal situation (and your credit) and decide what is right for you. Consulting an attorney can help you with this process.
Another option is for you to consider a short sale. With this option you find an investor who is willing to buy your home but for less than the amount that you owe the bank. The bank agrees to a short sale where they will be paid back less than the amount owed to them. This is a better option for you than foreclosure since you will not have a foreclosure on your credit and the mortgage will show as being satisfied (paid). You will still have a negative impact on your credit report for the missed payments but ultimately this is a much better option than foreclosure. The biggest mistake that I see homeowners that go with the short sale option make is that they leave the home! Why on earth would you leave and pay rent somewhere else when you can stay there and live for free while you are waiting for the bank to approve the short sale? One important fact that you need to understand with short sales is that there is no guarantee that the bank will accept the short sale offer. And if this is the case then you will still lose your home to foreclosure. However in my opinion you will feel better ethically knowing that you didn’t just walk away but tried to resolve the situation to the best of your ability.
What You Should Do Now
If you are not making payments on your mortgage then start saving as much cash as you can now. You will need money to move and you will need money to pay for rent, security deposit etc. If you can find a rent to own home or a home where the seller will give you some kind of financing you will probably need to put down at least 10% so save up your cash and start looking to the future not the past. You will feel better with this option too.
We buy many houses from homeowners in foreclosure and we have short sale negotiators on our team that are experts at negotiating short sales. If you would like to do a short sale please contact us at 800-617-2884 or complete the form here.