So you realize that your two year adjustable rate is going to reset in a short while and there is no way that your house is going to appraise in order to refinance. Or you bought your home one to two years ago and realize there is no way you're going to be able to sell the house for what you owe even though a job change, divorce, or other financial hardship is inevitable. If you have a definite financial hardship that you can prove in writing to the bank, you have one of six options to consider:
- Absorb the cost. For most people, this isn't an option. They either can't afford the increase in payments or to pay the difference in cash for what the are going to owe. Even if you could absorb the cost, it may not be a wise choice financially even long term.
- Modify your loan. The banks these days are working with borrowers in many different and creative ways. Many times this is good news. They are extending low rates after the initial period, they are adding interest and payments on to the end of the loan and principle, they are setting up payment plans with those who are able to get back on track after a loss of income. This may be a viable option for those who may have fallen off track, but are willing to put in the extrawork to get back in good graces with the bank.
- Offer a deed in lieu of foreclosure. In some cases the bank may consider taking the deed back if you as the seller have not been able to sell the home on your own and you don't owe a huge amount over the current market value. Each case and bank policy is different, so you'll have to find out the answer as this is on a case by case basis. A title insurance policy may be a good idea to offer in order to ensure clear title for the bank if they are skeptical about taking over title.
- Short Sale. This is when you get the lender to accept less money for the sale than what you owe. It is important to understand the full tax and financial repercussions of a short sale, but generally speaking a short sale is much better than a foreclosure on your credit. It is important to have an experienced full time agent working for you to get this sale through. A short sale is really an oxymoron (!) because it generally takes six to eight weeks to get a short sale through escrow. Although a short sale takes a lot of extra work and patience, generally speaking the seller is able to stay in control of the sale which can give peace of mind to many people. A short sale can be a great option for buyers when interest rates are volatile as they can "lock in" at the lowest rate during the long escrow.
- Foreclosure. This is the process of Notice of Default, Notice of Trustee's Sale, and then Trustee's Sale. Generally speaking this is the worst option and the borrower loses control over the situation.
- Bankruptcy. Many people don't realize that bankruptcy can stop the foreclosure process and can even delay or stop the Trustee's Sale. There are many repercussions of a bankruptcy or "BK" as those in the biz refer to it, but it may be the best option for you. It is important again to speak with the proper financial and legal professionals when considering this option.
There are many options available to you if you are facing a financial hardship. As a full time professional real estate agent I am happy to discuss your situation with you personally. Call me to make an appointment today! Susan Manning 951-551-7790 TopProperty4You@aol.com
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