Foreclosure Avoidance For Homeowners

Do you want some foreclosure avoidance solutions?  Well, some of the ideas I’m going to present are common sense.  Others fit the times specifically.  In both cases, here’s some foreclosure avoidance advice.

In all cases at all times, you should avoid buying more home than you can afford, even if you think the housing markets will continue to climb.  Don’t count on being able to refinance down the road in order to get into a bigger or nicer house.

Foreclosure Avoidance

Similarly, watch out for creative financing.  You want a 15 or 30 year fixed rate mortgage.  Stay away from “onterest only” or “teaser rate” mortgages because you probably won’t be able to afford the loan after the introductory incentives wear off.

But, if you have found yourself bound by either (or both) of these traps, there are still some things you can do towards foreclosure avoidance.

First of all, you can try to find a family or an investor who wants to buy the home for as much as you owe. Because there are so many good deals on the market currently, this may be difficult to do.

But, if you approach an investor, they may be willing to work with you on a “short sale”. This is a three way deal where you, the bank, and the investor all work together to a mutual advantage.  The investor gets a property at a good price.  The bank gets rid of a home.  And, you get to walk away from an upside down property.

A similar deal is called the Deed in Lieu of Foreclosure.  This is where the bank works with you directly.  You hand over the keys to the house and the bank assumes the property and the loan.

In both a short sale and a Deed in Lieu, there are two things you need to be concerned with.  The first is that the bank waives its right to come after you for a ”Deficiency Judgment” which makes you pay the difference between what you owed and what you let the house go for.  The second is that you need to know that both options will affect your credit.  Now, it is nowhere as bad as a foreclosure would be.  But, you still will see a drop in your overall credit score when you pursue one of these options.

But, turning your house over to someone else isn’t your only option these days.  For instance, you can work with the bank to lower your interest rate, stretch the payments out over a longer period of time, or tack on any deficiencies onto the end of your loan.  In this way, you can enter into a period of foreclosure avoidance.

Both Washington and the state governments have started to put together foreclosure avoidance programs. This is, in part, due to millions of home owners who have lost their homes and the millions more facing foreclosure.  But, it is also due to the national banking crisis that might undermine the world’s financial system.  The cynic will note that Washington didn’t care until it was the banks, not the homeowners, who were hurting.

In either case, there are some foreclosure avoidance solutions on the horizon.

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Categories: Real Estate