It's been in the news for over a year now, how so many people are falling behind in their loan payments and/or losing their homes to foreclosure. Folks are facing foreclosure for many reasons; they are over leveraged, have lost a job, their interest rate has gone up raising their monthly payment, have had to move due to their job and now have two mortgages and can't sell the first home, and so on. Let's face it, we Americans tend to live on the edge. We want as much as we can "afford" rather than settle for less and be able to put aside some money for a rainy day. All it takes is for one or two unfortunate personal experiences and now we can't make our mortgage payment. So what is a homeowner to do?
I think the first thing to do is be honest with yourself and don't panic about your circumstances. If you have experienced a job loss or your mortgage payments have creeped up, it won't take much time before you are in trouble. Acting on your challenges before it is too late is key. I've had several clients come to me to sell their homes after they have missed 6, yes SIX mortgage payments and the lender is getting ready to foreclose. In today's market a home may need that much time to get it sold. So, face facts and devise a plan as soon as possible. That plan will depend on the reason why you are in trouble. Here are some of your options:
- Working it out with your lender: You can talk to your lender or you can find a Realtor® who has experience with your circumstances to help. I actually have spent time on the phone with my clients' lenders and talked to their loss mitigation departments to work out a plan to keep their home, or keep it long enough to sell it. Never agree to terms that you won't be able to handle. If you can't work it out look at other options.
- Refinance: By now your credit may be scarred but all is not lost. If you belong to a credit union, start with them. If not, call me, I can give you some recommendations.
- Family: You never know what your family can do for you unless you ask. Don't let pride get in the way.
- Look under your mattress: This may sound kooky but some people forget that they have money stowed away. It may be in a CD that's ready to mature, or an old stock, jewelry that can be converted to cash, or a second car that is paid for and could be sold. You want to be careful though not to use cash advance from your credit cards unless you have a plan to end the problem shortly thereafter. Otherwise you'll just be further in debt.
- Realtor®: Find a Realtor® who has experience with your circumstances. Perhaps they can help you sell quickly and get you into a lower payment on a new home. It may not be your favorite choice but it can save you from losing everything.
You may actually end up combining some of these options. Let's say you current lender won't let you refinance, and your credit has been hurt so it's hard for you to qualify for a new loan, and you won't be getting that new job any time soon but you could afford something smaller on your spouse's income. Then you can talk to a Realtor® to help you sell your current home, talk to your family to help you keep your payments going until it's sold, find out if they can help you co-sign on your new loan and move on from there. Just remember, the sooner you work to address the problem, the sooner it will no longer be a problem.