(Click Here for Details) Reasons to Avoid Foreclosure
| You will always have to disclose that you have had a foreclosure on any mortgage application and many job applications you submit in the future and this can have an adverse affect on your future mortgage rates. This is the only credit item that is asked specifically and does not rely on what is on an individual's credit report. | | Your Credit scores will be lowered by 300+ points and a foreclosure is the most devastating credit issue you can have in relation to future credit availability. | | A foreclosure is the one credit report item that is almost impossible to have 'repaired'. | | Your lender can seek a deficiency judgment against you and collect for any amount they do not recuperate at bank sale. | | Many current employers run credit checks and a foreclosure can put a current position in jeopardy. | | Security clearances and government positions including but not limited to military and law enforcement can be jeopardized by a foreclosure. | | You may be responsible for any deficiencies after foreclosure for an indeterminate period of time depending on the state you live in; this can land a homeowner in never ending collections. |
Options Other Than Foreclosure
| Reinstatement | This is where the homeowner reinstates the mortgage by paying up all missed payments and fees and becomes current with the mortgage. After all the fees have been paid up then the homeowner can continue to pay the mortgage payments as they had. | | Forbearance | More commonly known as a re-payment plan, allows the homeowner to negotiate a repayment of missed payments and fees to reinstate the mortgage. | | Sell the Property | If there is equity in the property then the home can be sold and the foreclosure can be "cured" thus avoiding the foreclosure. If the home is worth less than is owed plus sales expenses then a short sale must be negotiated (See the section on "Short Sale Explained"). | | Rent the Property | The property can be rented however the mortgage must be made current. A rental agreement will not stop the foreclosure process. | | Refinance | If the credit rating hasn't been too badly damaged, a refinance may help especially if the monthly payments can be reduced. |
Deed-in-Lieu of Foreclosure | Commonly known as the friendly foreclosure, this involves for the bank to agree to foreclose and take the property back without the lengthy process. This is not recommended for properties with equity because the owner gives up the right to the property and any equity. This option is technically still a foreclosure and will show up as such on your credit report. Sometimes the bank will forgo any other recourse but that will also have to be negotiated. | | Bankruptcy | It cannot avoid the foreclosure but may allow the owner to reorganize debt and stall the foreclosure. Another drawback is that it makes it difficult to sell the property and almost impossible to negotiate with any third parties. | | Short Sale | When the homeowner owes more than the property is worth plus sales expenses, a sale can be negotiated and an approval obtained from the bank to accept an amount less than is owed.
Most of the options above involve negotiation with the bank and a decent credit rating. If the credit has been affected already, then the only real option that can help is the short sale. |
To learn more about your options from Certified Distress Property Expert© please fill out the form below.
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