Sometimes it’s hard knowing when you’ve been beat, or when it’s time to give up. With foreclosure, it’s different; it’s actually very easy to know when it’s time to throw in the towel. Foreclosure is a very costly procedure, both mentally and financially, so knowing when to stop fighting and when to move on with your life is very important. In this article, we are going to show you how to know when it’s time to quit fighting and how to successfully navigate the foreclosure process, with the least amount of damage to your credit.
Step #1 – Knowing when to quit
Like I said earlier, with foreclosure, it’s very simple: Once you’ve examined these three questions, you should know if saving your home from foreclosure is still possible.
Can you afford your home if your interest rate was set back to its original amount? If you can and your home hasn’t already been sold, then keeping your home is still possible.
Do you have enough money to pay 25% more than your existing mortgage payment? A repayment plan is possible if you can make your normal payment, plus 25% extra to pay the arrears.
Even if you can afford your payment, is your total payoff more than the home is worth? If you’re paying more than the home is worth, then why would you want to keep it? Unless you have a very strong sentimental attachment, or you expect the value to drastically increase in the near future, it’s probably time to move on.
In general, you can calculate your total payoff at a 9% interest rate, over 30 years. If this new payment is affordable for you and you’re not paying more for the home than it’s worth, then keeping your home is probably easier than you think!
Step #2 – Giving back your home without foreclosure
First, lets get something straight: every day I get calls from people who don’t want to keep their home and they think they can just give it back to the lender and walk away free and clear. They think they can keep their perfect credit score and give back the home without facing foreclosure. This virtually never happens. Your lender does not want your home and they certainly don’t want you to have the ability to give it back and walk away free and clear! The nearest option available that resembles this, is a “deed in lieu of foreclosure”. This is when the lender accepts the deed for your home and foregoes the foreclosure process. If done correctly and quickly, a deed in lieu of foreclosure could be your best alternative to foreclosure, but if not completed correclty, a deed in lieu can be worse than foreclosure! Another alternative to foreclosure is to sell the home using a short sale. A short sale is when your lender accepts an offer on the home for less than what is owed. For example, if you owe $200,000 on your home, but the best offer you have is $130,000, then your lender may accept $130,000 as a full payoff. When you lender accepts the short sale, this will (in most cases) stop the foreclosure process and if a deficiency judgment is not allowed, it can prevent any further damage to your credit. Professional help is highly recommended for either of these options, to avoid the many legal “loopholes” and financial pitfalls that accompany either of these options.
If going through foreclosure is inevitable, then your best bet is to get through it quickly. Don’t drag things out or waste time, explain your situation to your lender and make sure they know you want things to move as quickly as possible. Many homeowners and/or lenders drag the foreclosure process out for a year or longer. If the foreclosure process lasts for 12 months, you can expect your credit to take 12 months or longer to get repaired. However, if it only lasts for 3 months, your credit should be much less damaged and shouldn’t take as long to repair. Of course, this is assuming you only missed your mortgage payments during your hardship and your credit was good up to that point.
Step #3 – Stop dwelling on the past and look towards the future. Foreclosure is something that is happening to many people right now, so you are certainly not alone. There is no reason to keep yourself down or think that you did something wrong, you just need to make a fresh start and move on with your life. Your first step should be to get your income and expenses back on track. Find a new place that is more affordable and try to save as much money as possible. After your income is stabilized, you need to begin the process of credit repair. The fastest and easiest way to repair your credit is to pay off everything negative on your credit report(s). You’ll need to order copies of all three reports and begin to settle any outstanding debts. There are credit repair companies that can help you settle these debts for much less than the amount owed, so it may be a good idea to work with a credit repair professional. But be careful, because there are very few qualified debt settlement and credit repair professionals out there. Most companies you find online, or advertising on TV are frauds and outright scams! Feel free to ask us for a good referral in your area.
Once your credit, income, and savings are back on track, just let us know, and we can help you find a new home with a low fixed interest rate. Luckily there will still be plenty of deals on foreclosure properties when you buy your next home!