If you are facing foreclosure and looking for a solution you may have thought about doing a short sale on your home. Right now short sale investors are thriving in today’s current market because of how many people in foreclosure resort to using them. But before you consider a short sale there are several other loss mitigation options you should consider.
You should first know that there are a total of six loss mitigation options and a short sale is just one of them. So it is important to have a understanding of the other five choices before making a decision. The more knowledge you have the more powerful you will feel when trying to avoid foreclosure.
First you should understand the loss mitigation options are to provide an alternative to foreclosure for homeowners who have missed payments on their home, or know they are in financial trouble and may miss a future payment. Most of the solutions are for people who want to save their homes and the short sale should be a very last option to stop foreclosure and is just slightly better than the actual foreclosure itself.
Five Other Loss Mitigation Options
1. Repayment Plan- One of the first options to look into is a repayment plan. This option can work in a couple different ways depending on your finances but the overall plan is to catch up on your mortgage and bring it current. For instance maybe you will make double payments for a few months to bring the loan current.
2. New Loan Terms-This is where both the lender and homeowner agree to a loan modification or new loan terms. An example of this is where maybe the lender will agree for a lower interest rate, but a larger balance.
3. Forbearance- This is where the lender will allow the borrower to go for a specific amount of time without making a payment. An example of this is where they will add back payment amount onto the balance of the loan, so you pay it off at the end of the loan.
4. Assumption- This option is for someone who doesn’t have the means to stay in the home anymore. This is where somebody else who qualifies assumes the loan and resumes the payments.
5. Deed In Lieu of Foreclosure- This is another option for a homeowner who cannot afford any sort of payment. This is where the lender agrees not to foreclose, but instead you hand them over your deed and move out.
Understanding these loss mitigation options may help you make a more informed decision before turning to a short sale and thinking it is your only options. Remember to really look into the options and make sure you can afford the one that you think works the best, because if your are picking one of the refinance options you will have to prove to the lender that you can keep up with the payments.
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