Many Bradenton, Florida homeowners are struggling with mortgage payments and financial troubles. Some are facing foreclosure which can be devastating to your credit and your emotions.
If you are fearful of foreclosure it’s important to know that you really do have options. Here are 10 options to consider.
1. Get in contact with your lender: Bradenton homeowners facing financial difficulties often make the mistake of avoiding their lender, which is exactly the wrong thing to do. What should you do? Contact your lender as soon as possible and explain your situation. Let them know that you value your good credit and ask for their help. See what options they have to offer.
2. Turn to family members and friends: Don’t let pride stand in the way of asking for help from your family and friends. Think of it this way, if you were in a position to assist a family member or friend who was facing a similar situation, how would you feel if they didn’t ask you for help? Sometimes, just a little help can make a big difference.
3. It is possible to reinstate the mortgage: Reinstating the mortgage is when you catch up the delinquent payments. For example, if you expect your financial situation to improve in the near future you may ask the lender to work with you through this temporary set back. If you can come up with enough cash to bring mortgage payments up to date, the lender will probably agree to hold off on foreclosure proceedings. This is commonly called a “work out agreement.”
4. Seek a forbearance agreement with the lender: Forbearance allows payments to stop temporarily or be reduced for a specific length of time. The lender may grant forbearance of principal, interest or both. You will be responsible for repayment of the interest that accrues. Sometimes the borrower can make interest-only payments, or the interest will be added on to the principal. The key is to contact your lender right away. Even if you think it is too late, it’s never too late to ask!
5. Refinance the loan and consolidate your debt: With a good credit score and history, you may be able to consolidate your debt with a loan that actually lowers your total monthly payment to less than you’re paying on all your other loans put together. Be careful with this approach because you may only be making matters worse. Lenders will not accept a short sale when the loan is less than one year old.
6. Sell the home: If you have equity in your home, consider selling the home, paying off the loan, and finding more affordable accommodations. Selling the home is what 90 percent of those who are facing fincancial hardship really need to do, but unless you act quickly, you may run out of time. Of course, if you owe more than the home is worth, only a short sale can help you.
7. Negotiate a short sale: Lenders typically want to avoid foreclosing, because of the costs associated with it. Most lenders are open to accepting a short-pay on the loan if you can prove financial hardship. This isn’t something you should attempt alone. Talk with a knowledgeable Bradenton Realtor. Your lender is going to require that your home be listed with a Realtor.
8. Give a deed in lieu of foreclosure: You may be able to offer the lender the deed in exchange for them not foreclosing on you. You lose the house and your equity, but it’s not as damaging to your credit as a foreclosure. In a market with declining values it is unlikely that the lender will accept a deed in lieu of foreclosure.
9. File for bankruptcy: Bankruptcy is rarely the best choice. In most cases, it simply buys you some time, but it does not stop foreclosure. Bankruptcy is disasterous to your credit and is costly. If you are thinking of filing bankruptcy you should seek legal counsel.
10. Foreclosure: This is, by far, the worst option. With foreclosure you lose your home, lose your credit rating, and any equity you may have built up. After foreclosure you will probably not be able to buy another home for years to come and your credit will be ruined for years. You may also face a deficiency judgment. This is when you still owe what the lender lost.
Many Bradenton borrowers do nothing and end up in foreclosure or bankruptcy. The number one mistake of most people is denial. If you wait too long you will lose the opportunity to salvage your financial situation. You should know that doing nothing is not an option. Don’t wait until it is too late to be helped.
Is a Short Sale My Best Option?
If your financial situation is unlikely to improve in six to twelve months, a short sale may be your best option. The worse case senario is that the lender will give you a 1099 for the amount of debt forgiven. You may owe income tax on this amount. You will want to talk to your accountant to find out if you qualify for “insolvency” which will eliminate any tax due. Insolvency is when your liabilities (what you owe) are larger than your assets (what you own).
None of the above should be considered legal or tax advice. Always, consult appropriate professionals.
(Copyright © 2007 By Dan Forbes, All Rights Reserved.)
