A common misconception among homeowners is short sales are the only option. A short sale may be the most common and talked about option in the media, but it may not be the best option. Depending on your situation you have nine options.
Reinstatement
A reinstatement is the simplest solution for a foreclosure, however it can be the most difficult. You simply pay your lender all of the back payments and penalties to bring your mortgage current. You can 'reinstate' your mortgage up to a few days before the final foreclosure sale.
Benefit: Does not require the mortgage company or lender's approval.
Drawback: Requires you be able to pay all back payments, fines and fees.
Forbearance
A forbearance involves you negotiating with your mortgage company to allow you to repay back payments over a period of time.
Benefit: Allows you to make back payments over time.
Drawback: Requires you to be in a financial position to pay not only the current mortgage, but also a portion of the back payments owed.
Mortgage Modification
A mortgage modification involves the reduction of one or all of the following: the interest rate on the loan, the principal balance of the loan or the term of the loan. These typically result in a lower payments and a more affordable mortgage.
Benefit: Reduces mortgage payments.
Drawback: You must 'qualify' for the new payment and will often require full documentation.
Rent the Property
If your mortgage payment is low enough that market rent will allow it to be paid, you can convert your property to a rental and use the rental income to pay the mortgage.
Benefit: Allows you to keep your home indefinitely.
Drawback: Issues can arise with a rental property. Often the rent does not cover the full cost of maintenance and carrying cost.
Deed in Lieu
A deed in lieu allows you to return the property to your lender rather than go through the foreclosure process.
Benefit: Many times in a successful deed in lieu, the lender will waive their right to a deficiency judgment.
Drawback: Requires you vacate the property, and a deed in lieu may be reported to the credit bureaus as a foreclosure.
Bankruptcy
Many have considered and marketed bankruptcy as a 'foreclosure solution,' but this is only true in some states and situations. If you have non-mortgage debts that cause a shortfall of paying the mortgage and a personal bankruptcy will eliminate these debts, this may be a viable solution.
Benefit: Does not require lender approval.
Drawback: If you cannot afford the mortgage payment, a bankruptcy will only stall—not stop—the foreclosure process. Bankruptcy can be costly, is damaging to credit scores, and can only be declared once every seven years.
Refinance
If you have sufficient equity in your property and your credit is still in good standing, they may be able to refinance your mortgage.
Benefit: In some cases, this will lower payments.
Drawback: In today's market, many homeowners owe more on their home than it is worth and are unable to refinance.
Sell the Property
If you have sufficient equity you can list your house with a qualified Naples Florida real estate agent.
Benefit: Allows you to avoid foreclosure.
Drawback: In today's market, many homeowners do not have enough equity in their home to sell their property without negotiating a short sale.
Short Sale
If you owe more on your home than it is currently worth, then you may qualify for a short sale. You must have a financial hardship to qualify. Acceptable hardships include but are not limited to: adjustable mortgages adjusting, job loss, divorce, excessive debt, forced or unplanned relocation, and more.
Benefit: A short sale allows you to avoid foreclosure and minimize damage to your credit.
Drawback: Short sales can be a lengthy, trying process in which case you are best served by contacting a qualified Naples Florida short sale agent to help you along the way.
If you or someone you know is in need of a short sale or have questions about any of the options mentioned above please contact me using the form below.
