9 Ways Homeowners are Avoiding Foreclosure
- Reinstatement: Bring the loan current
- If reason for distress was temporary and resolved
- Can be done up to day of bank sale
- You must be able to pay all the payments and late fees due and your mortgage will remain the same
- Forbearance: Temporary re-payment plan
- If reason for distress was temporary and resolved
- Requires lender approval
- You may be allowed to make your back payments over time
- Normally does not fully reinstate mortgage until plan is completed
- Refinance: New loan with reduction in monthly payments
- If you have sufficient equity and strong enough credit score
- Typically a short term solution since your payments almost always go up
- Loan Modification: Modify original loan terms
- Requires lender cooperation
- Modifies loan and often reduces payment
- You will have to qualify with financial information most of the time like a full doc loan
- You must have verifiable means of income.
- You should be certain you can afford the modified mortgage payment.
- You can pursue a mortgage modification and prepare for a short sale simultaneously.
- See: MakingHomeAffordable.gov
- Sell the Property: Use equity to payoff or pay difference
- If you have equity, can sell and cure foreclosure
- Many sellers believe they have less time than they actually do
- Rent the Property: Must make loan current
- Can your property rent for the mortgage amount or more?
- In many cases rent does not cover full expense of property ownership
- Also need to factor in insurance and taxes
- Short Sale: Negotiate with bank to accept sale under loan amount
- A short sale can be negotiated if the homeowner has:
- Financial Hardship
- Monthly Shortfall on Financial Worksheet (or pending shortfall)
- Does not have significant assets to assist in paying down the mortgage
- A homeowner is ‘short’ when:
- When a borrower owes an amount on his property that when combined with closing costs and commission is higher than current market value.
- A short sale occurs when:
- A negotiation is entered into with the homeowner’s mortgage company or companies to accept less than the full balance of the loan at closing. A buyer closes on the property and the property is ‘sold short’.
- Deed in Lieu of Foreclosure: “Friendly” Foreclosure
- Sign deed over to bank rather than go through foreclosure process
- May still be reported as a foreclosure
- Typically only works with one mortgage
- Bankruptcy: Will stall a foreclosure and if payments are lowered to where property can be afforded may save property
- Very difficult to sell property once in the process, requires trustee cooperation
- Will only stall a foreclosure – will not eliminate mortgage
If you are experiencing a pending, temporary or permanent hardship in paying your mortgage, there are a number of alternatives to foreclosure that may help you save your home and your credit. Email David Hamilton or call today for a confidential no obligation consultation.
David Hamilton
Ferguson Realtors
865-224-6631 Cell
865-690-1300 Office
800-747-0713 Toll-Free
