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Homeowners In Foreclosure Do Have Options But They Are Limited
Being delinquent in your mortgage payments, in default or into foreclosure is not a good situation. However, there are numerous steps you can take if you make the right decisions early in the process. These include:
A. Contact your lender and ask them if they will reinstate your loan. The lender has some flexibility if he wishes to grant it. For example, you can make a partial lump sum payment against the arrearage and ask the lender to add the remainder to your loan balance. The lender can also extend the loan’s term to lower your monthly payments. The key here is communication. More than 50% of all people facing foreclosure never contact their lenders at all. The lender will be more inclined to exercise his options if he believes that you are serious about saving your home and that you will keep your side of any arrangements made.
B. Consider refinancing which is more feasible if you have a good amount of equity in the home and you’re not too far behind in your payments. If the lender agrees to this, he can add and late payments and fees for refinancing to the total loan balance. Most people, however, are so heavily ‘leveraged’ that there is little equity in the home and this makes refinancing unattractive to most lenders.
C. List the home for sale with a realtor that is also rather difficult for homeowners with little or no equity. That’s due to the fact that realtors charge a 4-6% fee for their services based upon the purchase price. If they increase the selling price to accommodate their fees, it can put the home above the current market value. Moreover, buyers will have a difficult time getting their own financing if the home is overpriced.
D. Sell the house by yourself buy placing a For Sale sign on the front lawn. You can also advertise it in newspaper classified ads. There are also people who will buy your home for investment purposes, but at well below its current market value. If worst comes to worst, you can do this, take the financial loss but avoid the credit stigma of bankruptcy or foreclosure.
E. Return the home to the lender who may agree to this provided the home is not ‘encumbered’ by other liens. This is referred to in the industry as a “Deed in Lieu of Foreclosure” that will let you walk away from the property. If you have any substantial equity in the home, this is not a good idea because it will all revert to the lender and you won’t receive any surplus amounts if the home is auctioned.
F. You can always file for bankruptcy but if this appears to be the only way out, you need to understand that there are different ‘types’ or ‘chapters’ of bankruptcy. Remember that while bankruptcy protects you from a large debt, it does pretty much disable your credit standing for a long time to come. Both types halt the foreclosure process. Consulting an attorney first is highly recommended. He or she can fully explain each chapter and help you decide which is the best for you.
G. Permit foreclosure to happen and don’t do a single thing. Of all options, this is
the worst because you will lose any equity and walk away with nothing but a
foreclosure on your credit report. Try all of the above. Make every effort possible before allowing foreclosure.
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[...] saman added an interesting post today on Homeowners In Foreclosure Do Have Options But They Are Limited.Here’s a small reading:G. Permit foreclosure to happen and don’t do a single thing. Of all options, this is. the worst because you will lose any equity and walk away with nothing but a. foreclosure on your credit report. Try all of the above. … [...]