A recent report shows that the number of defaulting homeowners is up, reversing the trend of positive gains over the last several months. While the increase in defaults is small, it indicates the economy is headed in the wrong direction as the stock market and overall economy is sputtering. Considering the current job market, it is not surprising to find that homeowners continue to struggle to make mortgage payments on over-priced real estate. As a result of the poor economy and job market, numerous clients have considered their options to refinance their property at today’s lower rates, to obtain a loan modification, or to short sale their property.
While each option has benefits, they each come with their own cost. A refinance typically requires equity in their property, Further, an individual wanting to refinance will also need excellent credit and sufficient income to meet difficult underwriting standards.
A loan modification does not require equity in the property or good credit. In fact, the opposite is usually the case. In order for a bank to agree to a loan modification, the house must be in such a negative situation that the bank would rather provide more favorable terms than take the home bank. In order to qualify for a modification, you must demonstrate that you have sufficient income to make reduced payments and you must have documentation to support that fact. While a loan modification can never be guaranteed, it provides a positive option for those looking to stay in their home who have no equity and may have experienced a decrease in their income.
A short sale is a process whereby the lender on the property agrees to sell the property for less that is owed on the loan. A short sale is a good option for those looking to move out of the property but want to protect their credit or control the way and timing of their move. For those that find they are significantly underwater on their loan or do not have income to qualify for a loan modification, a short sale is a good way to protect yourself from foreclosure, control the timing of your move, and possibly stay in your property longer than you would otherwise.
Although you may not like one of the options above, it is important that you act quickly if you find that you have fallen behind on mortgage payments. Contact our office immediately for a free consultation on your options and a plan to help you escape from over-bearing mortgage debt.