How to Avoid Foreclosure and Save Your Credit?
Are you several months behind on your mortgage?
Is your bank or financial institution ringing the phone of the hook?
Do you feel that you are about give up?
Don't feel alone and don't be discourage (I know you are). This is the situation that a lot of families are living across USA! Even knowing the disastrous outcome the banks over the last few years made it too easy to get more money out of our houses. While the real estate market was booming property values kept rising and homeowners were sitting on a gold mine. Sure enough, here come the disaster. While the market was declining home values were taking a dramatic plunge and most homeowners were sitting on over inflated mortgages and under valued homes.
The most unfortunate fact is that a lot of "homeowners" can't afford their mortgage anymore. Now they are facing the possibility of a foreclosure and the threat of losing their houses is as real as the sunlight. The banks realizing the critical situation opened a window of options for the homeowners. They realized that they don't want to be sitting on all of these houses after foreclosure and don't want to be stuck paying the property taxes and insurances until they sell. Add the foreclosure costs, the attorney costs... marketing that is not in their best interest.
One of the options that is being offered is called a short sale.
This is where the bank allows you to sell your home at or below the current market value in order to get a quick sale, regardless of what you owe. Let’s say that your mortgage is $190,000, but similar homes in your area are selling for $160,000. You can ask for $160,000 and can even possibly take lower bids. In turn the bank will take a loss on the home, since the sale will not cover the full mortgage, but they won't be stuck with the house anymore.
As far as the homeowners, they just walk away after the sale, free and clear. It is recommended that you hire a real estate agent that has the knowledge on short sales and preferably has had some experience and success with them. This is in your best interest, since they know the ins and outs and the paperwork involved. Not to mention, since you are already walking away with no money and this option will not cost you anything, it really is a no brainer.
Yep, not only does the bank take a loss on the home, but they also negotiate and pay the realtor fees. But there are some disadvantages, and everything it is not as wonderful as it sounds. Your credit will suffer some damage, just not as much as a foreclosure. An estimation about how bad could that be is that your credit can drop from 80 to 100 points with a short sale. However, with a foreclosure it will drop over 200 points.
You won't be able to buy a new house for up to two years with a short sale. It would be three years with a foreclosure. With this in mind the obvious solution would be to catch up your mortgage and then to make payments on time. Since this option is not viable for everybody, you would seriously look into a short sale before it is to late.
The mortgage companies are open to hear you, do not be afraid of them. They are willing to help, but you may have to talk to several people until you find someone to work with. Ask them if they have a loss litigation department. These are the people that are ready to and able to help you.
Stay Strong, Stay Positive and Good Luck!