If you do not know that America is in a mortgage crisis, you must have been hiding under a rock for the past year. There are record numbers of homeowners falling behind on their house payments. Getting too far behind, 90 days behind to be exact, will mean facing foreclosure. Stress builds as families go through losing their homes and their dreams. But there are ways to stop foreclosure:
This is the easiest and usually the cheapest way to avoid foreclosure. If you are already a couple of months behind on your mortgage and worried that you may go further behind, check into refinancing. If you can get a lower interest rate that will reduce your payment enough to make it affordable, that is the best way to go. It will not affect your credit, and the costs to refinance can usually be added onto your new loan. It only costs around $1,500 to refinance a mortgage. If you get an estimate for much more than that, shop around. You do not have to refinance with your current lender.
TRY TO NEGOTIATE A RE-WORK (MODIFICATION) OF YOUR MORTGAGE
Lenders are becoming more and more reasonable about granting loan re-works, also called a loan modification. The goal of loan modification is to reduce the monthly payment enough to make it affordable for the homeowner. Here are the different features of a mortgage that can be renegotiated with your lender during loan modification:
• If you have a high interest rate (higher than 7.5%), you may be able to negotiate a lower rate. A lower interest rate means a lower mortgage payment.
• You may be able to negotiate a decrease in your loan amount if you owe more than your house is worth. Lowering the loan amount will also mean a lower mortgage payment.
• You may be able to extend the term (the length of time) of your mortgage. If you spread your payments out over a longer period of time, of course, that means the payments will be less.
MAKE SURE YOU TALK TO THE RIGHT PERSON
Borrowers often call their lenders and assume that whoever answers the phone can assist them. Sheryl M. was three months behind on her mortgage and was facing foreclosure. She was able to scrape together enough money to make one and a half payments. She thought that would help get her back on track, so she called her lender. The person who answered the phone told her that it was too late for her to try and catch up on her payments because foreclosure proceedings had already started. If Sheryl had asked for the “re-work department” or the “loss mitigation department,” she probably would have gotten a different answer. If you call your lender about making partial payments, ask for the loss mitigation department, also called the re-work department or the loan modification department, and then ask to speak to the vice-president. He will probably have to call you back, but he is the one that will make the decision about what the lender can do to work things out with you.
DON’T MAKE UP SOB STORIES.
just be honest about your circumstances. The fear of losing your home can make it tempting to say things that are not accurate. But most of the time, the lender will find out the truth anyway. If you are caught in a falsehood, the lender will not want to work with you. Be honest and cooperative.
This is a quick sale to a buyer at a decreased price. The reason it is called a “short sale” is because there is a deadline by which the home must be sold. When a foreclosure letter is delivered to a homeowner, a date is given when the house will be auctioned off on the court house steps. If the property sells before that date, the homeowner will probably take a loss, but will at least be able to salvage his credit by avoiding foreclosure. The seller and the lender have to work out the details if the offer is less than the amount needed to pay off the mortgage. Sometimes the bank will assume part of the loss. The seller must assume the rest.
For example, if a homeowner owes $200,000 on his home, but the best offer on the house is $175,000, there will be an amount still owed of $25,000.
The bank may agree to write off $10,000 as a loss but will expect the seller to pay the remaining $15,000.
Most often, if there is a shortage, the seller doesn’t have the money to cover it, so the bank will work out a payment schedule.
Mike G., a friend of my husband’s, said he still owed a large amount of money after he worked a short sale on his home. He told my husband he would be paying the bank $100 a month for the rest of his life. He was probably exaggerating, but the point is that the bank will work to get as much as possible out of the deal.
Mike felt it was worth paying $100 a month to save his credit.
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