When a homeowner realizes that they can’t make their payments, they have a few options. First off, you must consult United Financial Counselors to determine your options and situation. We can help you figure out ways to make partial payments or add your payments to the end of the loan until you are able to make payments.
If those option do not work, and you are unable to make your payments, you may have to use alternative methods such as attempting a loan modification or consider selling your home. An appraiser or a realtor can help you make proper judgement of what you can get for your house. An appraiser might charge you whereas, a realtor, will give you an expert report using many of the same records for free. (UFC has personnel that can do this for you for free.)
If your home turns out to have little/no value or way more than you owe, speak with your UFC counselor and bank about doing a “short sale.” This means you are “short” the amount of money you will need when you pay off your loan. The word “short” does not apply to the process of getting a short sale pushed though. You will be required to make a portfolio of your finances and your situation. You will most likely have to actually be behind in payments already, to even qualify. You should try to get qualified for a short sale before you put it on the market. It makes the process much faster when you make an offer.
Note, since you have already fallen behind on your payments (which you most likely need to have done to qualify for a short sale) your bank could start foreclosure proceedings on you. It could be a race to sell your house before the bank takes it, which indeed can be quite a complicated situation.
Generally, this can affect people who are not even in financial trouble, and they have to move due to a job transfer or a rough divorce, later on discovering their investments in their home are not what they thought they would be. Some homeowners might not have enough money to sell it and pay it off. Those sellers can opt to pay the difference with a loan, their savings, or will be required to do the short sale.
In a short sale, banks have to have lots of people “sign off” on the bank losing money. This can take time to go from one department, to the next. Sometimes entire committees are involved in the process. The bank may even have to get a “go ahead” from a private mortgage insurance company (who may have insured your loan,) if you put down a low down-payment.
Short sales are better on your credit report than foreclosures. You may take a hit for less years than for a foreclosure. The United Financial Counselors recommend taking that route, even though it sounds like a tedious process, rather than giving up and letting the bank take your house.
In a short sale, the people will usually still live there, because they still own it. In a foreclosure they’ve been forced out of their home, and thus meaning the bank now owns it. Sometimes people in these situations do not leave the home in the best shape, so always do an inspection before you buy.