Indeed, for all those who own their homes, foreclosure is a very scary term to even hear. This is the last thing any homeowner wants to go through. Foreclosure is the worst possible scenario for a man who has trouble making payments on their home's mortgage. Anyway, all the people who have already faced foreclosure last year, better take their lessons well, but there should be no looking back-foreclosure must be avoided at all costs in the year 2009.
The homeowner loses their home when a house is foreclosed on. As an inevitable consequence, any equity they may have built plus their credit can be destroyed for a long time-i.e. for even a couple of years. And, the local community also becomes the loser - in the form of tax revenue the home produced. It suffers from the blight of abandoned homes.
Homeowners need to act as fast as possible if they fall in a situation where they may eventually be facing foreclosure on their homes. U need to keep in mind always that once a foreclosure hits your credit, it can take up to seven years to bounce back. In this new year,a few important and useful tips for avoiding foreclosure I want share with u all. If these easy-to-follow tips are properly followed and implemented very early in the process, can save a person the hard-earned money and most importantly - their credit.
contact your mortgage service provider
The moment you realize you may have troubles making full payments of your mortgage, do get in touch with your mortgage company soon. The longer you wait, your problems probably worsen more, fewer the options you will have in hand and narrower would be the scopes to help u out. The truth is that your lender does not want to foreclose on your house!!! Rather It is much more financially profitable for them to chalk out a payment plan or may be even refinance you into a mortgage. It is more affordable and better for your situation. When payment plans or refinancing are not an option, there are three strategies to be suggested for both the consumers and the mortgage company. These strategies are still more financially beneficial for all. These are: 1) a short sale, 2) an upside-down sale, and 3) a deed in lieu of foreclosure. However, one very very important mortgage warning here: All these 3 strategies will work only if u make the payment within 90 days. If you are 90 days late with a payment, all these options will be useless and foreclosure proceedings will start.
Know more about Short Sale
When a lender agrees to accept less than the seller of a house has to pay on the mortgage, that kind of sale situation is called short sale. In this situation, the seller doesn't need to bring money to closing to cover the difference. This is now perhaps the most commonly used strategy to avoid foreclosure. The difference between sale price and the payment amount owed is termed as income to the seller from the mortgage company. So, the seller has to pay income tax on it. However, this is true that there are many lenders in US who don't give much value to a short sale on your credit report, hence do not give it any more favor than a foreclosure.
What is Upside-down Sale?
If the seller of a house is promised or bound to pay more than the estimated value of the house ( the net worth), then the difference in the amount is to be made up at closing to legally transfer the title and deed of the property. Upside-down sale is the situation when the seller brings the difference in amount owed vs. net amount of sale to the closing. When a short sale is not an option, a person can go for an upside-down sale. In some cases, the seller can chalk out a payment plan with the mortgage company if it is not possible for him/her at that particular time to appear with the cash at closing .
Deed in lieu of foreclosure
When the homeowners can't sell out their homes, they give the deed of the house back to the mortgage company. This is done just to avoid foreclosure, of course., It actually allows the homeowner to avoid foreclosure, though this is not a preferred option for either party. However, again, from a lender’s viewpoint there is no difference between a deed in lieu and an actual foreclosure so he will not distinguish between these two situations when assessing your credit.
The most important financial guideline that a person suffering from mortgage problem needs to follow is building, at all costs, as bright, clean and impressive credit profile as possible. Having poor credit will create more economic firewalls for u and financial hardships down the road.