By Miriam Nicole Huffman, EM Legal Ease contributor
Times are hard. The economy is struggling. People are losing jobs. Help for the unemployed is diminishing, and many are finding themselves among those facing one of the worse credit problems in America – the threat of a home foreclosure. Instead of burying your head in the sand, now is the time to weigh your options. The one you choose depends upon whether you want to remain in the house, or cut your losses. The following is a list of some of your options.
If you do not want to move:
1. Short-sale with lease-back
Sale your home to a third-party, after the lender agrees to take less than the amount owed on the loan. Then, lease the home from the third-party who purchased it.
If you have made timely payments, and your credit is decent, you can refinance to a fixed note. Even if the fixed rate is a little high, you know that it will remain the same throughout the life of the loan.
3. Loan Modification
If you have back mortgage payments, and you are unable to refinance, you may request a loan modification from your current lender until you are ready to re-finance the home.
4. Chapter 13 Bankruptcy
Chapter 13 is typically filed by people who are trying to save their homes from foreclosure. Unlike a “liquidation,” Chapter 7, the debtor is given time to pay the arrears while continuing to make her current monthly payments. Many people are concerned that a bankruptcy will ruin their credit; however, if your payments are behind to the point where foreclosure is imminent, your credit is already ruined. Do your research before choosing this option. As a former family attorney, I never suggested bankruptcy to save a home.
If you want to, or must, move:
1. Deed in lieu of foreclosure
Deed the home back to the mortgage company. The information will appear on your credit report, but you will be free of your current mortgage obligation.
2. Sell the home
If the current market slump means your house is not appraising for the value of your loan, try to make a “short-sale” agreement with your lender. If you decide to file a Chapter 13 bankruptcy, because you have other debts, you can still sale your home while in bankruptcy.
3. Voluntary Surrender
You always have the option of cutting your losses and voluntarily surrendering the home. This choice, however, comes with its own credit consequences. If you are truly stressed over being able to afford the home, ask yourself these questions, “Do I really need to stay in the home?” and “Is it worth it mentally, emotionally, and financially to try to save the home?” If the answer to either of these questions is, “No,” it may be time to consider a voluntary surrender.
Contributed by Miriam Nicole Huffman, The Lifestyle Plan Strategist of MiriamNicoleHuffman.com.