If you have fallen behind on your mortgage or are concerned you will miss a mortgage payment soon, call your lender and know your options. These are the most common options.
- Refinance- If you think current rates are much lower and that extra reduction will help you be able to stay current on your payments this is a great option. Usually you will need good credit and stable income.
- Loan modification- If you are able to prove a hardship and your lender is willing to drop your interest rate this could be the option for you. It was a little more common in 2009 when people had rates that were 5-6 percent rather than now when rates are below 4 percent.
- Repayment plan- This is just a structured way to get caught up on your mortgage payments over time. It is a type of loss mitigation and may affect your credit score.
- Mortgage forbearance- This is when your lender allows you to temporarily make a lower payment or possible pause your mortgage, but all costs will deferred will be need to be paid back at a later date.
- Short Sale your home- This is an alternative to foreclosure, if the lender agrees you can sell your home for less money than is owed on the home, with no out of pocket costs to you. It is important to get a waiver of deficiency, so the lender cannot come after you for their loss after the sale is completed.
- Deed-in-lieu foreclosure- this is having the bank allow you to voluntarily hand over the keys and ownership to the house to avoid a full foreclosure. This option may allow you to avoid being personally liable for any amount remaining on the mortgage after the sale.
Do I Qualify ?
For home owners to qualify for a short sale they must prove a hardship.
If you live in your home for a long time, usually you will build equity through appreciation, so when you choose to sell your house it will be for a profit. Sometimes when you have to sell a property before you build equity or the market starts going down, you will want to learn the short sale process.
Any property qualifies for a short sale as long as the lender agrees to the price and terms. The successful closing of a short sale will rely heavily on these two criteria
- Financial Hardship – Divorce, Loss or decrease of income which leaves you unable to pay your monthly mortgage payment.
- Insolvency – The lender will ask for financial documents proving you do not have significant assets that would allow you to pay your mortgage.