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Most people these days know that foreclosure, short sale, or deed-in-lieu are the big three weapons that lenders use to prevent further loss. but there is a lot more in the lenders’ arsenal. Other remedies for troubled homeowners include:

1. Modifying the length of the loan or the interest rate
2. Waiving penalties and fees
3. Deferring payments to the end of the loan and making it longer
4. Applying past due amounts to the loan balance and slightly increasing each monthly payment
5. Holding a fixed rate on a loan ready to adjust
6. lengthening an introductory payment or interest rate or
7. granting temporary forbearance to stop the payments.

Presenting Your Request to the Lender

Not being social service agencies, banks do not widely advertise this “softer” side. To bring it out and allow a workout, you need to make a good case for yourself: make the lender confident that this will stop further loss. Just as is true with all credit issues, contact your lender at the first sign of trouble.  Your steps might include:

• Explain why you are in trouble and why you think the problem is temporary. If your interest rate changed and increased your payment, you need to show evidence you paid on time before change.  If your problems were caused by job loss, illness, or family circumstances, you need to show that it is likely you will have a job soon or that the crisis has passed.
• Show the bank that you have been trying to work things out on your own, through job hunting, part time jobs, or by reducing your living expenses.
• Present a specific proposal to the bank, with alternatives, verbally and in writing. A non-profit housing counselor, a real estate attorney, CPA, or other qualified source may be able to offer you some suggestions about what to propose. A typical request might suggest lengthening the loan, making it fixed, not adjustable, and lowering the interest rate.  If your proposal will lower your payment by $500 per month, you need to show how this will help you catch up and be on time in the future. A good faith payment might sweeten the pot if you are way behind.

Good preparation will increase the chance that the lender will accept your proposal.  Make sure to discuss with the lender representative how the new agreement will affect your credit record.  Your goal is to have your new payments reported to the credit bureau as “Pays as agreed,” but make sure you understand the credit ramifications before you finalize the terms.

If you decide you would prefer to sell your home, check out  Express Homebuyers.  We promise to buy your house fast or we’ll guarantee to help you sell your house fast and help you make a fresh start.

If you are in financial distress and fear you will lose your home, you may feel frustrated and hopeless.  Some of the alternatives presented to you may seem pretty much the same: you will lose your home. You can do a short sale, let the bank foreclose, or file bankruptcy.  Your choices may have the same import as waiters on the Titanic asking diners sitting in water to their waists if they preferred coffee or tea.

Being in this situation is not what you anticipated when you scraped and saved for your home. However, if you can adopt the philosophy that homes and material things are replaceable, you can get through the situation and aim for a fresh start.  Short sales, foreclosure, or  bankruptcy can provide this. What you should aim for is the solution that has the smallest long term impact on your credit score and the greatest chance for you to move onto the next step with dignity.

Preserving your credit score is important. Not only is a good credit score necessary to get future credit and get it at a decent rate, it may impact your ability to rent or buy a house, get insurance, and even get a job. If you fall on hard times, you will take an inevitable hit.  Your concern should be with preserving your score as best you can. The means that in order of the least damage to your credit, it is short sale, foreclosure, and bankruptcy.

Short sale: If your home’s value is not enough to pay off the mortgage, you could ask your lender to authorize a short sale where you can sell the home for less than you owe.  This approach saves the lender time and money compared to a foreclosure and allows you have more time to plan your nest move as the process takes a while. You will lose 80 to 100 points on your credit request, but within 18 months the impact on your score should lessen.

Foreclosure: When the bank takes your home, you lose 200 to 300 points on score and can’t buy another home for at least three years.  Given the large numbers of foreclosures these days, foreclosure might have a relatively small social stigma and economic impact over time.

Bankruptcy: Bankruptcy will remove your debts or allow you to repay them over time, depending on whether you file Chapter 7 or 13 bankruptcy.  The number of points you lose depends on what your credit score was before you filed, but the event will stay on your record from 7 to 10 years. Despite the effect on your credit rating, this may still be the best choice if you are burdened down with a lot of other debts besides your mortgage.

Any of these methods can offer a fresh start to you if you are in trouble.  If you want to sell your home now, Express Home Buyers can offer exciting alternatives. Whether you are in financial trouble, face foreclosure, have a property that needs a lot of work, or have an inherited house, we can sell your house fast. Because with us, it’s Guaranteed2Sell.