Short Selling, Foreclosure, And Other Options
Many people are suffering with crushing mortgage payments all around the country. States such as California, Nevada and Florida are really struggling. With high unemployment and the potential for it to grow even more, and suddenly higher mortgage payments due, consumers are trying to learn more about all of their options to see if there's something that can be done to help them out.
There are some options for consumers that they can look at. Some are drastic; some might end up being pipe dreams. But at least there are options.
The first option is to try to short sell your home. Short selling means you're willing to sell your home for less money than it's worth. As home prices have gone down, it has brought property values down also. A high number of people are suddenly paying more for a house than it's worth. If they need to get out from under the high payments, and can't sell the house for what it was initially worth, they may be willing to take a financial hit just to get out from under it.
With a short sell, the homeowner might still be liable for the difference between what was owed and what the house just sold for. It might be a minimal balance, in which case it'll be easy to pay, or the bank may waive it. If neither of these occurs, you will have a red flag on your credit report.
The second option is to allow your home to be foreclosed upon. Though this is a terrible option, it does have some benefits, strange as that sounds. One, foreclosures actually take a long time to push through. You could receive a notice within a couple of months of missing payments, but still be in your home for up to a year, especially if your home is in a distressed area. This means you don't have to immediately worry about moving if you need some time to think.
Also, at any point in the process, if your financial picture improves you can pick up on the payments and get out from under the foreclosure notice. This means you'd get to keep your house, and instead of a notice of foreclosure on your record, you'd have a notice of falling behind on your payments, which is still a negative, but not as bad as a foreclosure would be.
The third option would be to contact your bank and look to renegotiate your mortgage in some fashion. They may be willing to give you a couple of months of lower or no payments, throwing the full payment towards the end of your mortgage. You might be able to get a lower interest rate on your mortgage, although your credit score will have to be really high to get it, since banks haven't been all that willing to renegotiate, even with the government's push.
The fourth option is a wild card. You could decide to go for a forensic loan audit. This means you'd hire a legal firm whose sole goal is to go through your loan arrangement thoroughly, looking for some kind of error. If they find out, it might give you a loophole to canceling the contract and walking away without any penalties whatsoever. The cost of paying for one of these audits averages $500, but it's always possible that the people who created the original contract threw in something that doesn't conform to either state or federal law, and there's nothing saying that the lawyer you had to hire on your behalf to buy your home didn't miss something.
As I said, there are many options available; decide on which ones you feel will work best for you. That last option, though, might be the least expensive option to try.