Ultimate Guide When You Are Given These Options
It can be horrifying to think of losing your home because you can’t make the mortgage payments. Perhaps you are having difficulty keeping track because;
- You or a family member lost a job
- You’re having other financial problems
- You probably took out a mortgage that had a fixed-rate at the first 2-3 years then had an adjustable-rate
Or perhaps, one of the most common causes of financial hardship is the consequences of the COVID-19 pandemic. Millions are at risk of losing their homes. Thanks to the mortgage relief and foreclosure ban under the CARES Act. Many people are relieved from not having a roof over their heads during the pandemic.
However, not all homeowners are able to qualify for the CARES Act. Whatever the reason for your mortgage anxiety, we present to you these 3 terminologies that you might encounter.
FORECLOSURE
A foreclosure is a process by which a homeowner’s rights to a property are forfeited because of failure to pay the mortgage, Home Owner Association (HOA) fees or property taxes.
When it comes to the timing, it can vary on the governing state and lender policies. So depending on the policies of the state and the lender, it may only take 2- 4 months of missed payments before the bank starts the foreclosure process.
PROS
Eliminates monthly payments. When you lose your home due to foreclosure, you also lose your monthly mortgage payments. Perhaps, find a less expensive place to live. A place that better fits your current budget.
Make a fresh start. While foreclosure is a nightmare, it could also mean a sense of closure of a financial struggle. It may mean moving on to a fresh start within the safe limits of your budget.
CONS
Damages credit. The foreclosure will seriously damage your credit score. It could take 7 years before you may be able to buy a new home again.
Deficiency judgment. Depending on the state and/or federal laws at the time, and if it is a primary residence or not, you may or may not face a deficiency judgment. Deficiency judgment happens when the sale of your house doesn’t cover your entire balance. In this case, your lender may still come after you for the remaining balance.
You don’t have to go through the foreclosure prevention process alone. The whole process can be overwhelming which may prevent you from coming up with the best solution. Analytics Before Foreclosure has been helping distressed families keep their homes since the last Great Recession.
DEED IN LIEU of Foreclosure
If you struggle to make payments, and the value of your home is lower than your outstanding balance, you may not be able to sell your home. In this case, a potential solution is to sign over the home to the lender. ONLY if the lender is willing to agree to such an arrangement.
PROS
Debt is eliminated without foreclosure. You will usually be completely free from any debt related to your mortgage. Deed in Lieu is a less expensive and faster option than foreclosure. In many states, litigation is required in foreclosure.
Possibly no deficiency judgment. When the home value is lesser than the outstanding balance, the bank may waive the deficiency.
Extra Money. Lenders may offer money to assist with moving and expediting the transfer.
CONS
Damages to credit. Deed in lieu is less damaging compared to a foreclosure. However, it will still show up on your credit report.
Getting a new mortgage will be difficult. Major mortgage corporations will not buy a mortgage when you have previously signed a deed in lieu. Unless you have extenuating circumstances in the last two years.
SHORT SALE
A short sale is a pre-foreclosure transaction, an alternative to foreclosure or deed in lieu. It occurs when you and the lender decide that selling the property and absorbing a moderate loss is preferable to having defaulted on the loan.
PROS
Sell, pay & be forgiven. A short sale allows you to settle your outstanding balance or be forgiven by lenders.
Shorter processing time. It usually takes only up to 10 months compared to a foreclosure that may take more than a year.
Less damaging to credit. Debt paid in a short sale can have less negative impact on your credit.
Shorter wait time for a new mortgage. You can get back on your feet faster as you only have to wait for 2 years before being able to buy a new home.
Extra Money. Lenders may offer money to assist with moving and expediting the transfer.
Not all scenarios are the same. First, it must be identified whether you desire to keep your home or sell it, possibly for a profit. Analytics Before Foreclosure can assess your situation, answer your questions, come up with actionable options for your home. Contact 866-857-5405 now for a FREE discovery call.
