Straight Talk: When there is not enough in your paycheck for your mortgage – what should you do?
Straight Talk: When there is not enough in your paycheck for your mortgage – what should you do?
Sell, Loan Modification, Short Sale or Foreclosure.
If you are dealing with financial distress and the inability to keep your mortgage payments up to date my advice is to quickly educate yourself on your options and decide the best course of action for your family. Don’t wait! If you do nothing, the choice is taken out of your hands. You can end up with a foreclosure from your lending institution that negativity impacts your credit and the ability to buy another house for a minimum of 2 years.
Your options are:
1) Sell the house outright for at least what you owe your current lender and you come out whole. The marked benefit is having no negative impact on your credit history. Unfortunately, if you purchased within the last 2-3 years with minimal to nothing down; or if you put minimal down and obtained an interest only loan you could find it difficult for your home to appraise and complete a sale in the current declining value environment. If that is the case, you have the following three options: Loan modification, short sale or foreclosure.
2) Apply for a loan modification from your existing lender. While this process can be tedious you can have favorable results, stay in your home and have time to get back on your feet. Unfortunately each lender has their own process and follows their own timeline so you need to play by their rules, complete all paperwork in a timely manner and give them the documentation they request so they can render a decision. Then follow up, follow up follow up!
3) Short sale: simply stated you can sell your home and request that the lender of your current mortgage accept less than the total amount due. This is done as soon as a contract/offer is submitted to you. If you have both a first and second mortgage; you must obtain approval from both lenders and this process is even more challenging. The lender does not have to accept a short sale which means – no sale! They will weigh the options of your equity position and estimated marketing time and costs to see if the short sale benefits their bottom line versus taking the house back through foreclosure proceedings and selling it themselves. Short sales usually take much longer than typical resale closings, i.e. 2-4 months but the benefit is you will not have a foreclosure on your credit standing for 7 years and you can move on without any baggage to your next housing opportunity.
4) Foreclosures: When the lender holding you loan takes action to foreclose upon your property, you are given legal notification and after due process, you can and likely will be evicted from your home. In the state of Georgia, foreclosure can occur as early as 30 days after your first delinquency. While this is not typical, it is legally possible. It is beneficial for the lender to find a way to keep the homeowners in the property, not incur legal and real estate expense of upkeep and marketing. However, after a certain time frame, usually 2-5 months, action will be taken.
ACT NOW. Your best defense is to investigate which of these opportunities to pursue before the decision is taken out of your hands. When you know you will have a shortfall in making your mortgage payment start the process immediately, not 2-3 months into a delinquency. Lenders usually do not accept partial payments; therefore making less than the required mortgage payment is still considered a delinquency. Knowledge is powerful. Make the most of your alternatives despite the difficult choices. Having a plan keeps you and your family on track for adjusting to the decisions that must be made in these troubling financial times.
Your CPA and Mortgage Planner can help negotiate through these tough times by arming you with key information. As a 30 year veteran of the mortgage industry, my goal is to assist my clients through all the cycles of their life by managing their best mortgage solutions. I am available to assist with any questions or strategies to help you and your families navigate the current market conditions.
To learn more contact Ms. Sandra Hill of Georgia Residential Licensee #12149 at Trellis Financial Services, Inc. via phone at (770) 814-0552 or by the Internet at sandyhill@trellisfinancial.com
Sphere: Related ContentRelated posts:
