What to do if you cannot afford your house payments


Are you stressing over not being able to make your house payments and worried about losing your home to foreclosure? Trying to understand your options can get so overwhelming that you don’t know which one to choose.  You may have done hours of research and consulted various distressed property experts, and you are still unsure.  Maybe you’ve come to the conclusion that you need to do a short sale. Let’s review the various options to determine which would be best and help you avoid the long term, credit crunching effects of foreclosure.

First remember that none of the options are perfect. “Your choice should however be based entirely on your unique financial situation and goals” says William S. Lee, principal WSL and associates, a brokerage in Southern California.

5 Important questions to ask when trying to prevent foreclosure

According to Lee, here are five important questions a homeowner trying to prevent foreclosure should answer to aid him/her in the decision:

  1. Do you have equity in your home? If so, how much?
  2. Do you have verifiable income? If so, how much?
  3. Do you expect your current financial hardship to be SHORT or LONG-TERM?
  4. Do you have debts other than the mortgage? If so, how much?
  5. What are your goals for your home and personal credit?

Now, let’s look at the options. You can either decide to stay in the home, or sell it and move on. Here are options to stay in your home.

Options to Prevent Foreclosure

Loan Options

  1. Refinance: When you refinance a loan, you replace it with a completely new loan, usually a loan with better terms. What this means is that what you owe on the first mortgage gets transferred to a new mortgage, but at an adjusted interest rate which will likely be easier on you.
  2. Loan Modification: This doesn’t completely wipe away your previous loan terms, but it may make your payments easier to make. A loan modification process can take up to 6 months.  As a result, it might not be the best option for you if you’re at the brink of foreclosure. Banks typically will not do a loan modification unless you have missed a mortgage payment for 3-4 months. It’s a game you are likely chasing but can’t win as you already have outstanding debts.  If you have a already missed thee months of payments, waiting another six months for a loan modification process and foreclosure may just be at your doorstep.

Possible benefits of a loan modification

  • Change the monthly payment amount
  • Adjust the repayment length/length of the loan or
  • Lower the interest rate

If these first two options haven’t worked for you, then the following options may be your only remaining choices.

  1. Bankruptcy: The two most common forms of bankruptcy filings are chapter 7 and chapter 13.  None of them guarantees your mortgage will be removed or that foreclosure doesn’t take place.  However, a chapter 13 bankruptcy may be effective during foreclosure. Chapter 7 is the simplest and quickest form of bankruptcy and could provide the debtor with relief.   Note that filing a chapter 7 bankruptcy will not prevent a bank from foreclosing on your home if payments are defaulting.

Options to Walk Away

  1. Deed-in-lieu: A deed in lieu of foreclosure is a deed instrument in which a  borrower conveys all their ownership interest in the property to the lender in order to satisfy a loan that is in default and avoid foreclosure.
  2. Sell the home: If you have some equity on your home, you can either sell to a cash buyer who can close quickly or go through the traditional selling process.  Investors such as The Real Estate Solutions Guy can close quickly, often in 7 days or less, stopping your foreclosure.
  3. Short sale: When you have negative equity on your home, a short sale is the wisest option. In a short sale, the bank works with you to sell the home for less than you owe. The bank agrees to take less than owed and you avoid foreclosure.  Your home and credit are at risk, so if you are considering a short sale, make make sure your agent is an experienced short sale specialist.

 

Thinking of doing a short sale or just want to sell your home quickly?  Give us a call.  We want to buy your home.

 

 

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