Best foreclosure alternatives for homes in Ellicott City
If you have missed a couple of mortgage payments, you must be dreading the day when you will receive a ‘notice of default’ from your lender. A notice of default notifies that the borrower has not made their mortgage payments on time and if the money owed (and sometimes an additional legal fee) is not paid in a given time, the lender may choose to foreclose the home.
What most homeowners don’t know is that foreclosure is not the only option they have. A foreclosure can actually be one of the worst solutions.
- It can have a very negative impact on your credit score. You will not be able to buy a home for the next seven years until the foreclosure is on your credit report.
- It could affect your employment situation, security clearance and even cost you your job
- You can lose credibility with your community. There is a lot of stigma attached with this ‘F’ word.
- It is a lengthy legal process that will cost you money and waste a lot of your time.
The good news is that you have several alternatives to avoid foreclosure. You should get in contact with your lender as soon as you realize you won’t be able to keep up with your mortgage payments. Hiding from your lender will be your worst mistake.
Here are a few foreclosure alternatives that can help you get out of your difficult situation (These alternatives are applicable when you don’t want to keep your home):
Turn your home into a rental and sell
This step should be taken before you fall delinquent on your mortgage payments. If your home has built equity (it is valued at more than you owe), you can rent it out to cover the mortgage payments. Meanwhile you can find a buyer who is willing to pay a good price for the property. If you sell your home while you are up to date with your mortgage payment, your credit rating will not be affected and you can buy a brand new home whenever you are financially capable in the future.
Short sale
This option is for homeowners who are already in default. In a short sale, you enter into an agreement with your lender to sell the home for whatever the market will bear. If the amount of the sale is for less than what’s owed on the mortgage, the lender gets the money from the sale and relinquishes the remaining debt.
You should take this option only if your home has no equity or negative equity (your home is valued at less than what you owe).
Deed in lieu of foreclosure agreement
What ‘deed in lieu of foreclosure’ basically means is that you sell the house to your lender rather than a third-party buyer. You turn over the home’s deed to your lender and the lender in return releases you from any further liability relating to the mortgage. In some cases, you may be asked to pay a portion of the remaining loan balance, particularly if your home is valued significantly less than what you owe.
You should take this option if you were unable to sell your property at fair market value for at least 90 days.
Sell your home to a real estate investor
This can be a simple process and most will offer cash for your property. If you are behind on payments, this should be disclosed to the buyer along with any other important information. If there is equity in the property, you may come out of the deal with cash in your pocket to invest in other ways.
There are many investors looking for properties. You may have seen them advertise on the side of the road with signs stating, “We pay cash for homes” or “Homes for cash” or on Craig’s List, Facebook, etc.. This is a legitimate way to sell your home, as the sale has to go through a title company, which will assure all money is transacted properly.
Conclusion
You should accept foreclosure as your last alternative. Keep in mind that lenders are not in the business of real estate, so they will also like to avoid wasting time and money on lengthy foreclosure process. They would prefer discussing with you all the foreclosure alternatives.