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Ultimate Debtor Guide: Loan Modification Vs Short Sale Vs Deed In Lieu of Foreclosure

Are you a distressed homeowner? Falling behind on your monthly mortgage payments and receiving collection calls? Before you give up, you need to know what alternatives and options that can help you. Loan modifications,  short sales,  and deed in lieu of foreclosure are three options available to struggling  homeowners.

Read below to learn about the differences with the various programs and how they can help you.

Loan Modification Short Sale Deed In Lieu
The goal of a modification is to lower the interest rate, mortgage payment and obtain an affordable payment. If you cannot afford a monthly mortgage payment or you qualify for a loan modification, you might consider a short sale option. If you’re not qualified for the loan modification process or unable to sell your home through a short sale, deed in lieu is another option to avoid foreclosure.
This program achieves one or more of the following:

  • Reduction of principal mortgage balance
  • Lowering your interest rate
  • Extending the loan term
  • Adding the unpaid interest to the principal amount
It entails you selling your  home for less than the mortgage amount that you owe. The mortgage holder agrees to take back the property title without going through a foreclosure. A deed in lieu can be an alternative to foreclosure.
Loan modification is more favorable than a short sale and deed in lieu process because it allows you to keep the property. The lender agrees to the short sale transaction and accepts a loss. The title to the property is voluntarily transferred to the lender by the homeowner in exchange for a release from the mortgage obligation.
The process often takes time. Also, it’s best to consult with a team of  professionals like UFC because the loan modification can be very confusing with paperwork and the mod process.. A short sale can be a confusing and a lengthy process. It requires a homeowner to hire a realtor to sell the home and then appoint a company to negotiate with the lender. The deed in lieu can be a time-consuming and a complicated process to navigate.
Once you determine that you won’t be able to make the scheduled payments, contact UFC who will send a request to your lender for a loan modification.Your lender will decide whether you are the right candidate for the loan modification and can even  provide you with a temporary break from making monthly payments, to regain control of finances. After you receive a short sale offer, contact UFC who will submit it to the lender,. Keep in mind that there’s no guarantee of a short sale acceptance. The terms and conditions of a Deed in lieu of foreclosure are highly negotiable and depend on the relative bargaining positions of both borrower and the lender.
One of the top benefits of modification process is that you won’t lose your house and your mortgage will still be in place, but with new terms and conditions. In a short sale, you will lose your house. In a deed in lieu foreclosure, you will lose your house.
The short sale agreement must include the language stating clearly that the transaction is in satisfaction of the debt owned by the borrower and that the lender waives its right to the deficiency. The deed in lieu of foreclosure agreement must clearly express that your lender is waiving its right to the deficiency that remains.

The Bottom Line

When you are a distressed homeowner (falling behind on mortgage payments) knowing what your options are is very important. Your best bet to come out of financial distress is to contact us to help you navigate the best option for you.

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