Avoid Foreclosure — Save Your Credit
Are you several months behind on your mortgage?
Is the phone ringing off of the hook?
Do you feel like just giving up?
This is the scenario that is sweeping across America!
The banks made it way too easy over the last few years to get more money out of our homes. Property values kept rising, the real estate market was booming and every homeowner was sitting on a gold mine. This was sure to lead to disaster and it has.
Now with the market declining and home values taking a dramatic plunge, most homeowners are sitting on over inflated mortgages and under valued homes.
The unfortunate part is that a lot of people can no longer afford their mortgage. They are facing the possibility of foreclosure and losing their homes is a very real threat.
The good news is that the banks are realizing this and are now giving homeowners options. Otherwise, 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 this is not in their best interest.
One option that is being offered is called a short sale.
This is where the bank allows you to sell your home at or below the current market value in order to get a quick sale, regardless of what you owe. Let’s say that your mortgage is $180,000, but similar homes in your area are selling for $150,000. You can ask for $150,000 and can even possibly 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 be 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 real estate agent that is knowledgeable on short sales and preferably has had some experience and success with them. This is in your best interest, since they know the ins and outs and the paperwork involved. Not to mention, since you are already walking away with no money and this option will not cost you anything, it really 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 can 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.
Obviously, with this in mind the best solution would be to catch up your mortgage and then to make on time payments. Since this option is not viable for many people, I would seriously look into a short sale before it is to late.
Just remember that the mortgage company is not the enemy and not to be afraid of them. They are willing to help; you may just have to talk to several 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, Stay Strong, and Good Luck!
Avoid Foreclosure- Get Your Finances In Order
Foreclosure is one of the most traumatic things that can happen to a family financially. Foreclosure is a forced sale of property (your home) due to the fact that you no longer have the resources to pay for it. Foreclosure has affected millions of people in the last few years and this phenomenon hasn’t seemed to slow down. If you are looking to buy a home or already have a mortgage and would like to avoid foreclosure, one of the most beneficial strategies you can use is to get your finances in order.
How to Put Your Finances in Order
There are a few strategies for putting one’s finances in order. Since each person’s finances are unique, you must figure out which strategy works best for you. One of the most important ways to organize and understand your finances is to create and balance a budget. Many times we spend wastefully, keeping control of our spending is key to keeping our finances in order. With a budget, we can understand what our money is spent on, how much debt we have compared to our income and free up income in order to save or invest in the future.
In addition, for those with high credit card debt it is extremely important to reduce debt to a manageable level. This means paying your credit cards higher than the minimum payment asked for on a monthly basis, refrain from using credit cards for non emergency situation and holding off on purchasing items that are considered frivolous or luxury items. If your income is low, you may want to find a higher paying job. Easier said than done, many people choose job training or go back to school in order to find jobs that allow them a greater lifestyle.
Talk to a Financial Advisor
Another great strategy for putting your finances in order is to talk to a professional. A financial advisor is trained to help one manage their money more effectively. Whether you’re in debt or have millions in savings, a financial advisor can help a family or individual reach their financial goals. A financial advisor can look over your unique situation and tell you whether or not you may have problems taking out a specific mortgage. Financial advisors are able to discount emotion. So even though you want that home so badly, if it is above your means, your financial advisor will have no problem telling you the truth.
Start Now to Avoid Foreclosure
One of the ways you can avoid foreclosure is to put your finances in order and the best time to start is now. The quicker you start putting your finances in order, the quicker you will be able to afford that new home or reduce the risk of foreclosure. Unfortunately, many of us wait till we are already in the hole or about to foreclose to start managing our finances correctly. With a little prevention and money management you can avoid foreclosure.
