Many homeowners look to foreclosure to escape current financial dilemmas. Often times when unexpected hardships hit or the market makes a dramatic turn, homeowners can fall behind on their payments.
Below are the options that homeowners have before to help them out of their financial hardship.
1. Loan Workout: The property owner can Re-Negotiate with the Current Lender, this will buy the Homeowner time to make the payments or sell the home.
2. Refinance the Loan: This is great for those who have equity in the property and can qualify for a loan. Unfortunately, it is impossible to get a loan on an “upside down” property.
3. Loan Modification: This is a great option to lower a mortgage payment for those who qualify. This can be done through the loss mitigation department at the bank. It is important to remember that this does not lower the principal balance on the loan.
4. Forbearance Agreement: This option simply takes the back due payments and fees and adds them to the principal balance on the loan.
5. Deed in Lieu: A deed in lieu of Foreclosure is an option for anyone that does NOT want to stay in the property. The Homeowner will hand over their deed to the lender to avoid the foreclosure. It is also sometimes referred to as a “cash for keys” program.
6. Short Sale: Allows the owner to sell at less than the property is worth. This is the best option for anyone that needs to sell their over-leveraged asset. This is a WIN-WIN for both the lender and the homeowner. The lender does not have to incur the hefty foreclosure costs and the homeowner can get out from under the property without a foreclosure on their credit.
7. Foreclosure: Foreclosure is the last option and is generally the worst for everyone involved. You should avoid foreclosure for these 5 reasons.
1) Unlike most negative credit items, having a foreclosure on your credit report is virtually impossible to “repair”
2) A homeowner will always have to disclose that they went through foreclosure on all future mortgage loan applications affecting future financing rates and program availability.
3) Major decrease on your credit report affecting a persons ability to get to get a car, personal loans, or credit cards.
4) When filling out rental applications you must disclose that you have gone through foreclosure, greatly reducing the number of apartments available for rent.
5) Many Employers run credit checks when applying for a job, foreclosure is one of the main items putting potential new hires in jeopardy of not getting a job.
Have questions about any of this?
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Big Block Realty – CA BRE #01885775