There are options available to you that may help you save your credit, and maybe even your home.
A short sale is when a mortgage holder sells the home for less than the original value and settles the debt for the amount of the sale. For example, if the loan was for $250,000, but the house is now worth only $200,000, the lender may accept the lesser amount as a settlement of the debt.
There are a few reasons why a lender would agree to this:
- The foreclosure process can be expensive for lenders to pursue. A short sale can end up saving them money in the long run.
- Foreclosures can also be time consuming. If the lender wants to resell the property quickly, or wants to remove the current occupants as quickly and easily as possible, a short sale may be their best option.
Of course this is a much better alternative for the seller, as the damage to their credit isn’t nearly as severe as it would be with a bankruptcy filing or a foreclosure.
A Deed-in-Lieu of foreclosure is another option for homeowners facing foreclosure. In a Deed-in-Lieu, the homeowner transfers the deed to the mortgage holder in exchange for a release from the mortgage.
This option has the same benefits as a short sale for both the seller and the mortgage holder without the requirement of selling the home first.
Typically, the mortgage holder requires the homeowner to attempt to sell the house first, but after a period of time (usually 90 days), the mortgage holder will accept the deed as payment of the debt.
Chapter 13 Bankruptcy
Filing for Chapter 13 bankruptcy provides homeowners another means of avoiding foreclosure. Declaring bankruptcy allows homeowners to restructure their debt and provides them with a timeline for paying back any outstanding debt. The outstanding debt repayment plan is based on income, monthly expenses, IRS standards, and rules set by the Chapter 13 trustee.
Homeowners must still make their mortgage payments during this process as well as paying the amount in arrears.
Of course bankruptcy will have a seriously negative impact on credit scores that will last for 7 years, so this should be a last resort way of keeping a home.
Sell Your Home
Of course this is the best option for homeowners, and allows them to avoid any of the above steps. The homeowner must be proactive about this option, however.
There are several conditions that need to be met before this can be an option:
- The house must be worth as much or more than the remainder of the current mortgage.
- The homeowner must know months before any foreclosure proceedings are initiated that action needs to be taken. Homeowners will need to know that the mortgage is more than they can afford and make the decision to sell before any payments are missed.
Once foreclosure proceedings have begun, selling your home becomes a much more difficult process.
If you find yourself in the unfortunate circumstance of not being able to afford your mortgage payments, there are still things you can do to avoid foreclosure.
With proper planning, a regular sale can solve the problem. If a foreclosure notice has already been issued, there are still ways to avoid foreclosure.
Knowing all of your options is the first step in dealing with the problem.
Call Local Cash Buyers today to speak with us about how we can help you avoid foreclosure and keep you out of debt!