Why You Should Avoid Going into Foreclosure or Doing A Short Sale!
How Are You Going To Make Your Next Mortgage Payment?
This is the question that 60,000 Americans struggle to answer, right before their home appears on the foreclosure market. You may even be sitting there and asking yourself the same question right now. If this is the situation you’re going through, it’s important to realize that all is not lost.
Financial troubles can happen to anyone, regardless of education or income. These struggles cause over 500,000 families to lose their home every year. Of course, it’s a difficult process for everyone involved. But it’s unquestionably rough for homeowners who are uncertain how they’ll make their next mortgage payment.
So, what can you do if you’re in a similar position? If you hold a balance on your mortgage loan, then inaction is the sure way to a stressful foreclosure. Fortunately, you have options that allow you to avoid the anxiety that comes with this process. They all work in the event you’re not able or willing to continue paying your mortgage. Here’s what you can do to deal with unmanageable payments or an underwater mortgage.
How to Get Out of a Mortgage: Wait for Foreclosure or Complete a Short Sale
The first two options you have for getting out of a mortgage include waiting for the foreclosure process to finalize or completing a short sale. What’s a foreclosure and how’s it different from a short sale? Let’s cover both options for getting out of your mortgage.
Each state has different foreclosure laws, but the general idea is the same. First, you stop paying your mortgage. Usually this is due to a life or financial hardship. Next, your lender sends you a notice of delinquency, explaining your options for making your missed payments.If you don’t contact your lender, or catch up on payments, they’ll begin the foreclosure process in your state. This involves filing either a Notice of Default or a Lis Pendens, depending on state requirements.
A Notice of Default begins the non-judicial foreclosure process. It’s non-judicial because your lender doesn’t need to file a lawsuit and take you to court to recover the overdue loan balance. Instead, your mortgage contract gives your lender the right to sell your property and recover what you owe.
There’s also a judicial foreclosure process, which involves legal action brought against you by your lender. At court, a judge will verify how much money you owe and when you should pay. You’ll have a little time to catch up on your payments. But if you cannot make payments, then your lender sells or takes ownership of your property. That’s the foreclosure process.
Overall, foreclosure of your property can take years to complete. If you’ve chosen to stay at the property the whole time, then the process ends with a sheriff removing you and your belongings from the home.It’s an emotional experience that unfortunately happens to property owners all too often.
How is this different from a short sale?
During the foreclosure process, unless you pay off the mortgage, you don’t have any control of how or when things happen.That’s not entirely the case during a short sale. A short sale occurs when you accept an offer to sell your home for less than the mortgage amount that’s owed. Your lender must also agree to this deal.
Thus, a short sale requires that you work with a real estate agent, your mortgage company, and the third-party buyer. Unfortunately, completing a short sale, or finalizing the foreclosure process both come with major consequences you must understand.Here are the details about these options which may make you think twice.
The Best Way How to Get Out of a Mortgage Isn’t Foreclosure or Selling Short
There aren’t many pros of going into foreclosure. after enough time passes for your lender to legally reclaim or sell your home, you walk away and you’re out of your mortgage contract. Simple, right? Well, that would be the case if there were nothing but pros to going into foreclosure. As you’ve probably guessed, there are plenty of downsides. We’ll get to those later.
There really aren’t many upsides to a short sale either. The benefits are slightly better. Sure, you avoid foreclosure and you get to sell your home to the homebuyer of your choice. But despite these “pros,” short sales aren’t entirely in your control. Put another way, there are plenty of opportunities for things to go from, “I’m only underwater on my mortgage,” to “the bank denied my short sale! What am I going to do now?” Let’s talk about how things can go from bad to worse with either option.
Why Should You Avoid Going into Foreclosure or Selling Short
So, what are the cons of going into foreclosure or completing a short sale? Firstly, depending on the circumstances of your foreclosure, you may not be able to purchase another home for seven years. That’s a huge setback, especially if you were planning to store wealth in real estate.
For a short sale seller, it’s not much better. If you sell short instead of foreclosing, you must still wait years before you’re eligible for a new mortgage loan. In addition, because of the effects on your credit there’s no guarantee you’ll get accepted for any loans in the future.
Second, both options negatively impact your credit standing. Expect to see a reduced credit score for anywhere from five to seven years. That means you’ll have a lower credit score and more difficulty getting loans or credit. In addition, you’ll receive a higher interest rate on future credit purchases. Thus, you’ll pay a lot more to borrow money because you’re a “riskier” borrower.
Lastly, you may still owe money to either the government or your lender after a foreclosure or short sale. Yes, once you’ve walked away from your mortgage, you may be out of pocket thousands of dollars. Some states allow lenders to file a deficiency judgment for borrowers that sell short. This means you’ll owe your lender the difference between the mortgage amount and the sales price. Overall, this can be tens of thousands or even hundreds of thousands of dollars you again owe to your lender!
Likewise, after foreclosure, some states tax you on the debt you’re relieved of. In fact, most states see the mortgage loan you didn’t pay to be taxable income. Therefore, if you foreclose or complete a short sale, you could still end up owing thousands of dollars to your lender or the government. Talk about a bad deal!
Walking Away from a Mortgage: Strategic Default and Deed in lieu of Foreclosure
Must I sell my house or are there other alternatives?You have a few options which include undergoing a strategic default or turning over your deed in lieu of foreclosure. But, are either of these right for your situation? Let’s discuss what these options are and why people use them to walk away from their mortgage.
What are Strategic Defaults and Deeds in lieu of Foreclosure?
Strategic default is when you stop paying your mortgage, even when you have the financial means to pay. When and why would you ever not pay if you had the financial means? Usually, homeowners go through a strategic default when their property is worth much less than what’s owed on the mortgage. This situation is commonly referred to as holding negative equity, having an “underwater mortgage,” or being “upside down.”
Strategic foreclosure is essentially the same process as foreclosure, but the negotiation period is a bit different. By negotiating with your lender, they may give you additional time to exit your property and may even pay you a fee for maintaining your property.
A Deed in lieu of Foreclosure is a bit different from strategic default. Instead of waiting for the foreclosure process to begin, you’ll speak with your lender ahead of time and attempt to work out an agreement. If your lender agrees, you transfer title to your lender, and get to walk away from the property.
How Can Strategic Default or a Deed in lieu of Foreclosure Help You
Let’s review the upsides of strategic default or a deed in lieu of foreclosure. First, you have a little more control in what happens during the process, but not much. Second, with strategic default, you don’t pay a mortgage payment until your home is reclaimed. And finally, with a deed in lieu of foreclosure, you don’t undergo the full foreclosure process.
These sound like potential solutions, right? Well, not so fast. Although these options might appear slightly better than a “standard” foreclosure, it’s important to understand all the potential risks.
Why Should You Avoid Strategic Default or a Deed in lieu of Foreclosure?
Both strategic defaults and deeds in lieu have negative consequences, including:
- A three to seven year wait to become eligible for a US government agency home loan.
- Income tax equal to the amount of debt forgiven on your loans.
- A major, ongoing flaw on your credit report for up to seven years.
- A potentially long foreclosure settlement period, and
- Possible legal ramifications, especially if you carry a second mortgage.
As you can see, both options, just like the standard foreclosure process or selling short are risky for homeowners.What’s the best way to sell my house fast? Well, let’s look at the best option for getting out of your mortgage in the least amount of time possible.
The Least Time-Consuming Option – Selling to a Home Buying Company
What are home buying companies? Home buying companies help homeowners sell their property quickly. When you need to sell your home fast to avoid foreclosure, home buying companies pay you all cash and remove your mortgage obligation. That way, you don’t risk your credit, life goals, or your money like you do with foreclosure and its similar alternatives.
Why work with a Home Buying Company?
So, why is selling your property to a home buying company the best option for paying off a mortgage? Here are the many benefits.
First, you avoid credit default.
You already know how damaging the foreclosure process is on your credit history. Working with a home buying company is the quickest way to stop foreclosure or avoid it outright. And that can mean the difference between retaining your good credit or losing your ability to get another mortgage or consumer loan for years to come.
The foreclosure process takes a long time to complete. Selling your home with a real estate agent also takes months you may not have. In contrast, a homebuying company reduces the time it takes for you to get out of foreclosure by purchasing your property within days. Plus, home buying companies are able to help you if you face financial trouble.
Just because you’re late on the mortgage payment in facing pre-foreclosure, doesn’t mean it’s too late to avoid credit default. The best home buying companies will catch you up on your mortgage payment in addition to paying you all cash for your property. That way, your mortgage is up to date and you continue building your positive credit history.
Second, getting out of your mortgage becomes a lot easier
When you want to simply get cash for your property so that you can get out of a bad loan, using a home buying company is the way to go. You’ll receive a cash payment and be out of your mortgage obligation within as little as seven days. There’s nothing better than getting the cash you need and removing your financial obligation from a debt that’s causing your family stress.
Furthermore, there’s less negotiation with your lender. A short sale, deed in lieu of foreclosure, and even a strategic foreclosure require you to work with the bank. With a short sale, you need to present the offer to your lender, which can eventually fail. Something similar can even happen with a deed in lieu of foreclosure. If the lender doesn’t feel that either option is profitable for them, they’ll deny your requests. Save yourself the trouble by working with a home buyer instead.
Lastly, you get another chance to succeed.
Going through a foreclosure is a life changing process. It affects both your physical and emotional well being and has long lasting consequences. Here are a few ways you get a second chance when you work with a home buying company.
There aren’t many things you can do without good credit. If you’ve been late on payments or have a property foreclosed, then you have less options for what you can do in the future. Moreover, going through a foreclosure means that you’ve lost control of your financial future. You’re at the whim of financial institutions that can stop you from accomplishing the goal of becoming a homeowner or from accomplishing your other financial goals.
When you work with a homebuying company, you get a second chance to succeed. You’ll end the foreclosure process and reverse any negative credit reporting. But what’s more is that you gain your freedom. You’re not tied to missing mortgage payments anymore. Plus, you’re free to apply for a home loan again, whenever the time is right for your family. Sometimes second chances are exactly what’s necessary to live a happy and successful life.
There is a nearly instant solution is available to help you deal with your mortgage and financial troubles. Don’t wait months or years to resolve the issue. Get rid of your stress today, and have hope for the future, by working with a professional home buying company.
Stop Feeling Helpless! You Have Options Available
Play the video below to learn more!
It’s time to really weight all your options. They include conducting a short sale, going into foreclosure, undergoing a strategic default, or selling to a home buying company. When you think about the pros and cons regarding the amount of time it takes to go into foreclosure and the risks involved, selling to a home buying company is the best option. It’s the only one where you take control of your financial situation in the least amount of time possible.
The Choice Is Clear – Work with CashForVirginiaHouses.com
If you’re currently late on your mortgage payment, or you refuse to pay on your property with negative equity, we can help. We buy houses quickly and give you the money you need to turn things around.
When you’re ready to discover and take control of your financial situation, give us a call at (757) 797-4748. We’ll help you decide what’s right for your family and give you a fair offer within minutes.
*CashForVirginiaHouses.com and its affiliates are not CPA’s, lawyers or a law firm and we do not provide legal, business or tax advice. None of our representatives are lawyers and they also do not provide legal, business or tax advice. The accuracy, completeness, adequacy or currency of the content is not warranted or guaranteed. Our sites and services are not substitutes for the advices or services of an attorney. We recommend you consult a lawyer or other appropriate professional if you want legal, business or tax advice.