Adjustable rate mortgages, declining home values, loss of jobs, tighter credit, high national deficits and a crazy global economy have definitely had an effect on the real estate market over the past few years. One of the fallouts of all of this has been the ever-increasing number of foreclosures that have happened throughout the country. Though the vast majority of homes being foreclosed upon are in certain pockets throughout the country (Florida, Michigan, California etc.) it is not uncommon for homeowners here in Northwest Ohio to be facing foreclosure too.
People keep asking me, "Why don't these people just refinance their home?" What most people don't understand is that to refinance a home, the home has to be valued at enough to cover the loan on the home. Unfortunately, housing values have depreciated significantly over the past few years leaving many homeowners with loans greater than the value of their home thus resulting in what is called negative equity. When that happens the bank does not want to give a new loan for a home that is more than it's worth. When that happens the homeowners are stuck facing the higher adjustable rates and the resulting higher payments. As those payments increase and adjust every 6 months or year the homeowner’s typically begin struggling to make the payments.
So, what should you do if you find yourself in this situation or one similar to it? Many people just give up and stop paying their mortgage and eventually face foreclosure.
You do have options.
If you find yourself dealing with a situation like this the very first thing you should do is begin talking to your lender. The sooner you begin talking to them the better chances you have to find some relief. You must understand that the bank does not want your home thus they are typically motivated to find a way around getting it back at foreclosure. They may be able to renegotiate the mortgage or help you find a better way to work through it.
One option that the lender may be willing to consider is what is commonly called a Short Sale.
A short sale is when the lender will consider taking less on the home than what is owed on it. For example, in a short sale if the home were worth $100,000 but the owner owed $120,000 the lender would allow you to sell the home for $100,000 and potentially forgive the outstanding $20,000. Going through a short sale is not typically a real "simple" process but it is one that can be worked through. There are advantages and disadvantages for doing a short sale but the biggest advantages are you avoid foreclosure on your credit and you are able to move on with your life often without that upside down mortgage hanging over your head.
Having to deal with a short sale or foreclosure is not the greatest place to find yourself in but if you do, don't ignore it and hope it will go away. Instead be proactive and get the most of what you can out of the situation.
If you need any help in your situation, give us a call and we'd be glad to try and help.
scott
Realty Five of Defiance
888.766.8627
