What do I do if I cannot afford my payments?
Feeling like there is no option but foreclosure can be a frightening and depressing experience. Hundreds of thousands of Americans are in the same place right now, and are feeling just as overwhelmed as you are. Fortunately, there are solutions, and we are here to help.
You need guidance from someone who understands the difficult choices you are facing about your property, your family and your life. All too often, people feel that they must go through the process alone, forced into a frightening situation caused by unforseen circumstances that they cannot control. Facing damage to your credit, and the possibility of not being able to buy another home for many years to come can be a tough future to face, but by having an ally that is knowledgeable of the options for you will be a tremendous benefit.
You have come to the right place. We will provide you with information about how to avoid foreclosure, explain the effects of foreclosure, and offer options that will help you. Most owners today are opting for a short sale, and we can help to determine if you qualify.
Please know that any information you share with us will be kept strictly confidential and we do not charge any up-front fees for our services.
The information below will offer you some initial insight into the process. If you would like to speak with us directly to discuss your options, you may fill out the form below, or simply give us a call.
How to stop the foreclosure process
There are many ways that unforseen hardships can change your financial situation, turning the joy of your home into an incredible burden. Whether you have had a sudden illness or accident, causing medical bills to pile up, or you have been laid off and unable to find a new job, or your adjustable rate mortgage has adjusted, pushing your payments beyond your budget, the outcome is always the same. No matter the cause of your situation, ignoring the problem only makes it grow. You must act quickly to preserve your well-being and resolve the issue.
Here are a few tips on stopping the foreclosure process on your home:
1. Look for other sources of temporary help. Many homeowners do not realize that they have a variety of resources available to help with their mortgage. Have you considered the income created by unemployment benefits or disability income? You could also check your savings for temporary help, cut the household budget, or trade in expensive cars, boats and/or motorcycles for cash. You could even use retirement funds, but please be aware of possible penalties for accessing retirement funds early, as well as increased income taxes.
2. Contact your lender. If you have reviewed all possibilities, reach out to your lender. Do this as soon as possible! Create an agreement that would alter your mortgage, stopping foreclosure proceedings before they are finalized.
3. Review the options. After speaking with your lender, you may still have other options. Typically, lenders are not required to make adjustments to your loan, but will consider it as a viable option. This could include refinancing, benefiting both you and the lender. Some of the options you may consider with your lender include:
- Deed in Lieu of Foreclosure – Many people consider this “sending the keys back to the bank.” Basically, your lender accepts the title to your home, rather than going through the full foreclosure process. Beware that they may still sue for loss & report uncollected funds to the IRS as taxable income to you. You may also still have negative marks on your credit report.
- Claim Advance – If your mortgage is held with a private mortgage lender, they will sometimes provide a cash advance to bring your payments up-to-date. The amount will sometimes be added to the principal of the note, but you will not incur ongoing late payment fees. Another example of this is considered “Re-Amortization.”
- Short Sale – This is considered by many people as the best option available. When you go through a short sale, your property is listed for current market value. Once you accept an offer, you send a packet of information to your lender. This packet includes details of your hardship, and your inability to pay as agreed. Lenders are often willing to accept this option as it greatly reduces the expense and time involved in the foreclosure proceedings. Typically, a short sale does far less damage to your credit than a foreclosure.
Beware of scams!
Many unscrupulous people find opportunity in preying on those most in need of help. The Federal Trade Commission recently compiled a list of warning signs that a foreclosure bailout company may be a scheme. Here are some of the red flags. Beware of any company that:
- guarantees to stop the foreclosure process, no matter what your circumstances are.
- instructs you not to contact your lender, lawyer, or credit/housing counselor.
- collects a fee before providing you with services.
- accepts payment only by cashier’s check or wire transfer.
- encourages you to lease your home so that you can buy it back over time.
- tells you to make your mortgage payments to them, rather than to your lender.
- tells you to transfer your property deed or title to them.
- offers to buy your house for cash at a price that is not set by the housing market at the time of sale.
- offers to fill out paperwork for you.
- pressures you to sign paperwork that you have not read thoroughly or that you do not understand.
The Effects of Foreclosure
It is all too common these days that homeowners are facing the tough decision about whether foreclosing is the only option they have. Going through with a foreclosure will have serious implications on your family and your credit for the rest of your life.
When homeowners cannot make payments for their home, the lender may repossess the home in the process of foreclosure, usually reselling it, to recover the amount owed on the original loan.
A few of the effects of a foreclosure are:
1. Credit scores will be lowered, sometimes by more than 300 points. This is the single-most devastating mark possible on your credit report, and it will affect all of your future credit possibilities.
2. Foreclosures are nearly impossible to have repaired, and most likely will remain as a blemish on your credit report.
3. Any future mortgage application you complete will require you to reveal a previous foreclosure. At best, this will have a negative effect on the mortgage rates available to you, if you are offered a loan at all.
4. Most employers now conduct credit checks prior to offering employment. With a drop in your credit score due to foreclosure, you may also hinder your employment opportunities. This is especially true for positions in the government, law enforcement & financial positions.
5. Some employers have resorted to running credit checks on current employees in the event of layoffs. Those with lower credit scores are at greater risk of layoff than others.
6. In order to recuperate money they did not receive during the sale of your foreclosed property, lenders may seek a deficiency judgment against you in order to obtain the balance.
7. Your family will need to relocate. This is always a disturbance for children, marriages, careers and other aspects of your life.
What is a short sale?
A short sale is an agreement where your lender agrees to accept a payoff on your loan that is lower than the original loan amount. This agreement often benefits everyone involved.
- Property values are maintained, as the home will not be left vacant for extended periods of time.
- The homeowner is able to maintain a better level of credit.
- The bank will recover more of the principle, as they will be spared the expense of the foreclosure process including legal fees, time off the market, association dues and more.
In most instances, homeowners considering a short sale must meet specific criteria to qualify: they must be behind in mortage payments, provide evidence of economic hardship, and have little or no equity in the property. Notice, we said that this is the case in most instances. Short sales are an art, not a science. If you have not yet missed payments, but are worried that your rising costs could break you, it is always a good idea to try and short sale rather than take your chances alone.
A short sale is not a typical real estate transaction… most transactions involve the seller, their real estate agent, thebuyer, their lender, and their real estate agent. In a short sale, all of those parties are involved, in addition to a loan servicer, a housing counselor, any junior lien holders, mortgage investors, and insurers may be involved too. With so many parties invovled, the process is quite difficult to complete without a qualified realtor to act as your guide and liasion between all parties involved. You will want the advice adn expertise of a real estate team who has your best interests in mind and will expedite the transaction. It is essential to have a Realtor, who is detail oriented and will not allow you to miss a detail that may delay the closing in a timely manner.
What is the difference between a short sale & a foreclosure?
Review the following comparisons for a better understanding of why short sales are typically the better option:
1. What are the implications to my credit score?
- Short Sale: Your mortgage will appear on your credit report as either paid or negotiated, lowering your score as little as 50 points. This will likely affect you for only 12 to 18 months.
- Foreclosure: Your credit score could be lowered as much as 300 points and affects your score for over 3 years. The typical reduction is at least 250 points.
2. What are the implications to my credit history?
- Short Sale: Usually will be reported as paid in full and is not reported on your credit history.
- Foreclosure: Will remain on your credit history for 10+ years and will remain as a public record.
3. Who decides if my home should undergo a short sale or a foreclosure?
- Short Sale: The lender must agree to the short sale. If they feel confident that selling the property on the open market after the foreclosure process will net more money, then they will not agree to the short sale.
- Foreclosure: The lender will decide when to start the foreclosure process.
4. How long will I have to wait before buying another home?
- Short Sale: Most mortgage lenders will start offering acceptable rates again within 2 years of a successful short sale. Fannie Mae guidelines allow you to apply for a new loan immediately if payments were kept current & there are no 60-day late payments on your record.
- Foreclosure: You may end up waiting another 2-5 years before a mortgage lender will offer you an interest rate that is acceptable.
5. What will the effects be on my future loans?
- Short Sale: Usually you will not be asked to disclose previous short sales on new loan applications.
- Foreclosure: You will be required to disclose a previous foreclosure for 7 years after a foreclosure, affecting your rates.
6. Will my employment opportunities be affected?
- Short Sale: Short sales do not typically appear on credit reports, so your employment status will not be affected.
- Foreclosure: Some employers see a foreclosure as grounds for dismissal or reassignment. A foreclosure could also be extremely harmful to your chances of being selected for a new job, if credit is a consideration in the decision-making process.
7. How will the deficiency judgment be affected?
- Short Sale: The lender may give up the right to pursue a deficiency judgment against you. If they do not give up this right, the amount of the judgment will be considerably lower than a foreclosure, as the sales price will be closer to market value than that of a foreclosure sale.
- Foreclosure: In all foreclosures, with the exception of states without deficiency, the bank has the right to file a judgment against you. This judgment will be for the balance of the loan plus any carrying costs & legal fees incurred during the foreclosure process.
Details on how we can help…
To schedule a confidential consultation, call 305-741-3713 or email firstname.lastname@example.org.