Tag Archives: foreclosure

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How to get out from your Under Water Mortgage?

Are you having trouble paying your mortgage? Are you behind on your mortgage and are starting to consider foreclosure as an option? No one ever imagines themselves buying a new home then later face foreclosure. Where do you begin to untangle this mess? The first step is to understand what you are really up against. What does foreclosure really mean and why shouldn’t you give up?

Foreclosure is one of the many things that can happen to you when your house has a “Negative Equity” and you fall behind on payments. You might have heard this term a lot since the economic downturn. Negative Equity happens when the value of your home is actually worth less than the amount that you still owe on your mortgage. Having this makes it difficult to market your house because a prospective buyer is very unlikely to make you an offer adequate to cover your mortgage balance. When this transpires then there is a likelihood of your home being foreclosed. So what does it mean for you?

When being foreclosed on, the homeowner will have to give the keys back to the lender and “willingly” moving out of the house. Once a homeowner has been served with notice to move out, it is always in the homeowners best interest to leave without causing a scene and risk the potential for  the embarrassment that can come with having the police involved for the eviction process. Unfortunately, foreclosure hits your credit profile and is considered derogatory by credit scoring systems. This mark on your credit can make it difficult — sometimes impossible — to borrow money for another home, car or any major acquisitions for quite some time. It is really a difficult place to be in. Therefore, if it can be avoided, it’s in the best interest of everyone involved.

Quite honestly, the only clean way out of a bad mortgage would be to sell your home for as much as you can and then come up with any deficit balance in cash at closing. This would allow you to satisfy the loan fully and will result in no negative credit reporting. Of course, you might have to come up with thousands of dollars to save your credit rating. And for some of us this might not even be a viable option at all. So what if you are one of them?

Then you might want to consider a short sale!

In a short sale, you sell your home for less than the amount you owe on it. You might have heard that the bank accepts the proceeds of the sale and you get to walk away. Luckily, here in Orlando, this is precisely the case. Florida is one of the 12 states where once your creditor favours a short sale and you sell the property, you’re free (Non-Recourse State). In the other thirty-eight states, you may still be accountable for the “deficiency” – the percentage of the loan not recompensed by the short sale. If you live in one of these 12 states then this could even be enough of a reason why you should consider putting up your house for a short sale.

Also, short sales are less damaging to your credit and will help you recover quicker than a foreclosure, which can help you receive loans faster. If you decided on a short sale, know that your credit score is still going to take a hit, but at least this may not be as severe as a foreclosure.

Although short sales are not exactly risk-free when it comes to the seller’s credit and other financial implications, it definitely opens the door to solutions for homeowners that can allow them to dodge legal actions and the long, strenuous foreclosure process.