Alternative to foreclosure do exist. You, as a sharp, informed homeowner can avoid foreclosure. But, you need to have a basic understanding of the options open to you. In my office, I specialize in helping homeowners, owner-occupants and investors, escape foreclosure, the credit killer.
Right now, you are most likely under terrific stress, especially when you finally realize that you will be missing your mortgage payment for the first time. You are experiencing sleepless nights wondering when the bank will foreclose and you will be out in the street. Then, the phone calls from the bank start. Each time you answer, the voice on the other end wants to know one thing: when are you going to make that payment? how about a partial payment?
You do not need to undergo that aggravation. Here are few alternative open to you. Remember, though, that each situation is unique, so not every option applies to you.
#1. Do Nothing--This is, unfortunately, the most common reaction and, of course, doing nothing results in precisely that–nothing. You must do something.
#2. Loan Modification-This may result in a lower payment which you may be able to afford. Various bank and government-supported programs exist and most likely your bank is participating. You will have to send a mound of paperwork to your bank, including bank statements, pay stubs, tax returns and financial forms. Click here for more information.
#3. Reinstatement–This method you work out with your bank. If you can make up back payments or work out a payment schedule, your bank may reinstate your loan as it was before. Sometimes, to get a loan mod, you must also reinstate or partially reinstate your loan. That is, you must make a lump sum payment to get started on the loan mod.
#4. Refinance--If you still have equity in your home or are not too far underwater, this is a great option. In fact, the federal government supports a program which might allow you to refinance at today’s low rates up to 125% of the value of your home. In California, most homeowners are so far underwater that this program does not apply.
#5. Rent the Property–This might work if you are an investor and have another place to live. In California, though, the rental value of most underwater properties is far too meager to cover the mortgage, taxes and insurance. That means you would have to move out, find somewhere else to live and still pay a substantial amount on your underwater home.
#6. Bankruptcy–This used to be a better way to go than it is now. Now, new bankruptcy laws basically force judges to order Chapter 13, rather than Chapter 7 which completely wipes out debts. Chapter 13 reorganizes the debt, so, adding the new bankruptcy charges, the debtor winds up saddled with even more debt, and now a long-term agreement on paying it off. At least we’re not sending our fellow citizens to Debtors’ Prison or the Workhouse as in Dickens’ time… Anyway, bankruptcy will stop a foreclosure, but only temporarily.
#7. Sell the Property–If you don’t want the house anymore, this is a good option. But, you need to have enough equity in the house to sell. Contact me to get a value for your property. That way we can see if you have enough equity to sell.
#8.Short Sale–If the current market value of your house, as determined by recent neighborhood comparable listings and sales, show you do not have enough equity for a standard sale, then a short sale is the way to go. In this alternative, your agent prices the home correctly, finds a buyer and then negotiates with your bank to sell it for less than you owe. If you qualify for a government-backed program, you could also get $3000 for moving expenses. The bank pays all the selling fees.
If you are interested in knowing your home’s current market value or if you are contemplating a short sale, send me a quick email and I will get back to you.