There is a lot of pain out there! Home owners who are underwater and can't pay the mortgage. They want to save their properties, their investment and their credit...but they are bombarded with information and examples which may or may not apply to them.
The main problem I see is that everyone in a position to offer help have a financial interest in their decision.
Bankruptcy Attorneys
Real Estate Agents
Lenders
All have a financial gain if the home owner decides to move forward with a decision. There is no reason to pretend that we don't...but that doesn't mean we don't care and won't give our best advice.
Loan modifications are new to the housing market. I could never have imagined when I bought my home 10 years ago that it would be possible to change the terms of the mortgage without refinancing and simply by telling the bank I didn't like the payments. Of course it's more complicated than that....but isn't that how it's presented to home owners sometimes? "call us and we'll threaten your lender into getting the loan reduced and your interest rate so low they will pay YOU every month" or something like that.
False hopes!
There are many ways to find out if you qualify for a loan modification....but it might not be what you want to hear. Generally speaking, the banks need proof of income and your loan can't be more than 33% of that gross income. The lowest I've seen is about 3% interest rate for the first 5 years. Again....generally. But if you have income you can't prove...or none. If you are so far upside down that you need less than the example above, you will likely not qualify. It's the tough truth.
But hope survives as long as someone on the Internet talks about the miracle they got from their lender.
False hope, I'm afraid. And the consequences of hoping can be devastating.
For one thing, if you spend too much time chasing the loan modification which won't come, you ignore some real solutions....such as a short sale. A short sale might be the best situation for you and your credit. If you are in this situation, you need to get some legal advice and tax advice. But we are seeing that credit scores recover faster after a short sale, especially if that's the only late payments you have. Additionally, lenders will normally lend to you only 2 years after a short sale...a foreclosure will affect you and your credit for much longer.
By postponing a short sale and hoping for the loan modification, you might run out of time. Don't assume the lender will automatically postpone a foreclosure date to allow you to now market your home as a short sale....they might, but they might not. There is nothing worse than having to tell a seller that we just came in too late in the process to stop the foreclosure.
The other risk happens once you are in escrow and decide to try "one more time" for the loan modification. I'm working on a short sale right now where the seller is going to try "one more time." My heart goes out to him....I completely understand that if there is a chance of keeping the home, then you want to do that. Of course you do....but make sure you are realistic. In this case...the buyer is not going to wait, they have already waited a long time and need to move. If the seller is turned down...again....then this buyer might be gone and if we can't provide another, the foreclosure will go through. Dangerous.
If you are in this situation....try and be realistic. Not for my benefit....if you can keep your home, and there is anything I can do to help, I will. So would any other Realtor® out there. We are people first and keeping someone in their home is wonderful. But if you are grasping at straws, be honest with yourself and make sure you do get out of the situation the best possible way...for your future.
If you are considering a short sale, I would be happy to talk with you personally and confidentially. Although I'm not an attorney and can't give you legal advice...I can talk with you about the process of the short sale and set some expectations. I can also recommend local attorneys and CPAs who can offer you specific professional advice and direction. Get all the facts and then make a decision which best suits you, your family and your future.
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