There is no worse feeling that being in debt with no way to pay what you owe. In many cases the result is a letter from your mortgage company saying that you are in default of the loan agreement and they are beginning the foreclosure process. At this point, you may feel completely defeated and have no idea what your options are. But it is important to remember that you have a few options and that all of them will have a long term impact on your financial future.
Your first option is to contact the lender to try to negotiate some type of payment plan which will stop the foreclosure. A lender doesn’t really want your home, they want the payments and interest that you agreed to pay them. Lenders only recently have become more adept at foreclosing and reselling homes due to the financial climate. But that takes the investment of more time and money on their part. So it is very possible that you can negotiate a plan with them to save you both from the foreclosure processing any further.
If the lender is not willing to negotiate or you simply can’t make the current payments and catch up on the late payments then selling is a good option for you to salvage your credit for the future. A short sale is where a homeowner sells their home and the bank gets the money. The only issue arises when the sale amount does not cover the entire mortgage due. In that case, you might still be required to pay the bank the additional funds. But this process has less negative impact on your credit that a foreclosure or bankruptcy. You can also try to sell your home outright during the foreclosure process. This is a conventional sale and you get the money to pay off the mortgage. If the house sells for more than you owe, then you get to keep the proceeds. This is a good plan if you know that you have equity in the home and don’t want to lose it.
If your home is not the only bill that you have fallen behind on or if the amount past due is substantial, then you might consider filing for bankruptcy. There are two types of bankruptcy and the best option is determined by your type of debt and if you want to try to repay any of it or just discharge all of the debt. But it is critical to remember that declaring bankruptcy will greatly impact your credit score and ability to get credit for seven years or more. Allowing the foreclosure to proceed will also have a major impact on your credit score in the future but it will settle the debt with your mortgage lender.
All of these options have good and bad aspects according to your specific situation. Speaking to a real estate professional at Phoenix Home Buyers Group is a great way to learn more about your options and make an informed decision about selling to avoid foreclosure.