8 Most Common Options When Facing Foreclosure
A homeowner has 8 basic options when facing foreclosure. It is best that the homeowner takes action as soon as possible so that they have enough time to deal with foreclosure and have the best outcome. The biggest mistake that homeowners make is that they do not take action in time. These are the 8 most common options when facing foreclosure.
Option 1 – Do nothing
Do nothing is the option of default. The homeowner doesn’t have to do anything for this option but the homeowner loses their home and their credit gets severely damaged. The foreclosure will follow them for years to come and they will not be able to buy a home for 7 years. It will be difficult to rent a house or even finance a car.
Option 2 – Pay Off / Refinance
If the homeowner is behind on payments, it will difficult to refinance the property but if the homeowner is current on the loan, it is a good option to lower the monthly payment if they have a high interest rate. The homeowner will not get a principal reduction by refinancing the property.
Option 3 – Conventional Listing
If the homeowner has equity then they can sell the house outright. If the homeowner is overleveraged, they would have to come out of pocket to cover the difference from the sales price to the amount owed.
Option 4 – Reinstatement
Reinstatement means that the current loan is put back in place and restored. In order for Reinstatement to work, the homeowner will have to pay the monthly payments missed while they were in foreclosure in full on top of all the legal fees and late fees.
Option 5 – Deed in Lieu / Walk Away
To do a deed in lieu, the homeowner gives the deed to the bank. The homeowner essentially gives the keys over to the bank and moves out. In some cases, the homeowner will get some relocation money from the bank to move.
Option 6 – Loan Modification
A loan modification is amending the mortgage to new terms. What is typically done is that the bank extends the loan from thirty to forty years. Unfortunately there is an 85% failure rate for loan modifications according to HUD, a government agency. Stay away from any company that charges anything upfront or a monthly fee.
Option 7 – Bankruptcy
This option will not stop the foreclosure but it will delay the foreclosure. The homeowner typically has to pay an attorney a very large upfront fee or retainer and pay them every month. If the homeowner does not pay them or runs out of money, the attorney will no longer help.
Option 8 – Short Sale
A short sale is when the bank agrees to take short of what is owed on the mortgage and the house is sold without the homeowner having to bring money to the table to close. The homeowner can purchase a new home in as little as one year later after the short sale, the homeowner gets to live in the home for several months longer, the short sale is not reported on credit history (only the missed payments), and the homeowner typically gets relocation money from the short sale. Not only that, it doesn’t cost the homeowner anything to participate in the short sale. It is important to work with a team that handles short sales on a regular basis.
|
Name *
|
|
|
Email *
|
|
Privacy Policy: We hate SPAM and promise to keep your email safe.