How To Avoid Foreclosure And Save Your Credit

Are you several months behind on your mortgage payments?

Is the phone ringing off of the hook because debtors are trying to contact you? 

Do you feel like just giving up? 

This is the type of scenario that is sweeping across America! 

The banks made it way too easy over the past years to get more money out of our homes.  Property values kept increasing, the real estate market was booming and every homeowner appeared to be sitting on a gold mine.  This was sure to lead to failure and it has. 

Now with the market turning down and home values taking an impressive plunge, the majority of homeowners are sitting on over inflated mortgages and undervalued homes. 

The unfortunate part of all this is that many people can no longer afford their mortgage.  They're facing the possibility of foreclosure and losing their homes is a very real threat. 

The good news is that the banks are understanding this and are now offering homeowners some alternatives.  Or else, the banks will be sitting on all of these homes after foreclosure and will be stuck paying the property taxes and insurances until they sell.  Factor in the foreclosure costs, attorney costs, and marketing costs this is not in their best interest. 

One option that is being given is called a short sale. 

A short sale is where the bank lets you sell your house at or below the current market value in order to get a quick sale, in spite of what you owe.  Let’s say that your mortgage is $200,000, but similar homes in your area are selling for $150,000.  You can ask for $150,000 and can even probably take lower bids. 

The bank in turn will take a loss on the home, since the sale will not cover the full mortgage, but they will not get stuck with the home.  As far as the homeowner, they just walk away after the sale, free and clear. 

It is suggested that you hire a short sale real estate agent which will be knowledgeable on short sales.  Also, it would be even better if the real estate agent has had some experience and success with short sales.  This is in your best interest, because they understand the ins and outs of short sales and the paperwork involved.  Not to mention, because you are already walking away with no money and this option will not cost you anything, it actually is a no-brainer. 

That’s right, not only does the bank take a loss on the home, but they also negotiate and pay the realtor fees. 

Now there are disadvantages, and it is not as wonderful as it sounds.  Your credit will suffer, just not as much as a foreclosure.  It is estimated that your credit could drop 80-100 points with a short sale.  However, it will drop over 200 points with a foreclosure. 

You will not be able to buy a new home for up to 2 years with a short sale.  It would be 3 years with a foreclosure. 

Clearly, with this in mind the best answer would be to catch up your mortgage and then to make prompt payments.  Because this option isn't viable for many individuals, I would seriously explore a short sale before it becomes too late. 

Just keep in mind that the mortgage company isn't the enemy and not to be scared of them.  They are willing to help; you may just need to talk to various people until you find someone to work with.  Ask if they have a loss litigation department.  These are the people that are ready to and able to help you. 

Stay Positive, Remain Strong, and Good Luck!