Owning a home is an enormous accomplishment, but unfortunately often a source of stress, anxiety, and financial difficulty. Perhaps you have experienced unexpected life changes, unemployment, or other difficulties that have made your previously affordable mortgage payment now out of your reach. You may assume that foreclosure is your only option, but before throwing in the towel for good, educate yourself and learn your alternatives.
Foreclosure Defined
Foreclosure eventually occurs when you stop making your regular mortgage payments and take no other preventative measures to protect yourself. It’s a legal process in which the bank that provided your mortgage loan aims to regain the money loaned to you. The bank requires that your house be sold in order to reacquire the owed money. This process severely impacts your credit score and ability to buy a home in the near future.
Three Important Foreclosure Alternatives
Loan Modifications. If you’re in the right position, it’s very possible you could be approved for a modification of your current loan to make your payments more affordable and place any past due balance onto the end of your loan term. Most loan modifications extend your mortgage back to the 30-year term in order to distribute the extra costs. Many different programs exist in Florida to work with people coming from various situations that instigated the looming foreclosure.
Short Sale. If you aren’t approved for a loan modification but still want to avoid foreclosure, a short sale could be your best bet. A short sale occurs when you sell your property for less than the total debt owed. In this case, your lender would accept the amount as complete payment of your mortgage. You can qualify for a short sale by proving you are in financial hardship and cannot continue to make payments. This is a lengthy process with many complexities that an attorney can help you navigate.
Deed in Lieu This option is not available until your property has been on the real estate market for a few months and still has not sold. You can essentially allow your bank lender to repossess your house in exchange for cancellation of the foreclosure proceedings. This is an attractive option for many people, because it releases you from the debt associated with the loan and eliminates a foreclosure report on your credit score.
Florida’s foreclosure rate is double the national average, so be sure that you understand your options before accepting foreclosure as inevitable.
