As we all know, foreclosure is a hot topic in today’s real estate world. While we don’t have answers to all the questions people may have about foreclosure, we do have some options you can bring to friends or family who may be facing this difficult situation. We don’t suggest that one particular option is better than another; we just want let everyone know that there may be alternatives.
- Loan Modification
Talk to your lender about lowering the interest – or even the principle amount – of your loan. Ask your lender about government loan modification programs that may be available. Many people consider this option before deciding upon a short sale or foreclosure. Read all mail and e-mail from your lender.
By paying off late payments and fees, you bring your outstanding loan amount back to its current, non-delinquent status.
- Short Sale
A short sale occurs when you (and a qualified real estate agent) obtain the lender’s approval to sell your home for less than the amount you owe to the lender. This usually has a far shorter term negative effect on your credit than a foreclosure. Short sales have become a heavily used option in today’s market.
Look into refinancing your mortgage in order to lower your monthly payments. All lenders will inquire into the state of your credit, along with other aspects of your finances.
If you and your lender can agree on a figure and a payment basis, you may be able to temporarily pay back the outstanding amounts owed until you return to your current, non-delinquent status.
- Deed in Lieu of Foreclosure
This is often called a “friendly foreclosure,” because it avoids court proceedings. You ask your lender if you can give back your property in order to satisfy the loan. In most cases, this will not affect your credit as badly as an actual foreclosure.
Filing for bankruptcy will forestall foreclosure proceedings, but foreclosure will eventually take place.
- Sell Your Home
If you have any equity in the home, try using that to pay the lender the outstanding balance. At that point, selling your home may be a possible option.
- Rent Your Home
Loan payments should be current before you rent. Once you’re current, you will want to rent at a rate that will cover your monthly mortgage payment.
TAKE-AWAY: There are several options for dealing with foreclosure. It is up to you to decide which one works best for your situation.