- Consider this option only in the direst situations and after seeking counsel from a qualified legal
bankruptcy professional.
- If you choose this option, be sure to allow your attorney time prior to the auction date of the property
to collect information from you and file court documents to stop foreclosure proceedings.
Pros
Bankruptcy generates a temporary hold on the foreclosure process as soon as court papers are filed.
Cons
- Filings are available to the public, which can cause embarrassment for you or your family.
- Bankruptcy filing does not necessarily stop the foreclosure process permanently because the lender might
restart the foreclosure.
- Can reduce your credit score by as much as 200–300 points, and remain on your credit report for 7–10
years.
- Can prevent you from obtaining a new mortgage for up to seven years.
- Might cost you a job, if a potential employer sees this on your record.
If you have a friend or family member who is willing to purchase your house, this is one of the best options
available.
Pros
- You can rent or lease the house back, providing the transaction was not a short sale.
- You will not have to move out of the house or uproot your family.
Cons
- Discussing your financial challenges with your friends and/or family can be uncomfortable.
- You could lose whatever equity you have in your house by selling under less-than-ideal circumstances.
If you find a real estate investor who is willing to purchase your house, this is another of the best options
available.
Pros
- You can rent or lease back the house, if the transaction was not a short sale.
- You will not have to move out of the house or uproot your family.
Cons
- You could lose whatever equity you have in your house by selling under less-than-ideal circumstances.
- Locating a willing investor is difficult because most prefer to purchase property then sell it quickly at
a profit.
- Potential investors might be wary of selling back to you because of your inability or unwillingness to
pay your current lender, which could affect a potential investor’s decision.
If you have time to sell your house, this is one of your best options.
Pros
- If your property is worth more than you owe on the mortgage, you might be able to sell it quickly enough
to pay off your mortgage before you lose your property and your equity, and receive some cash when you close
the sale.
Cons
- Selling your house can be challenging in this market with many homes for sale and few buyers able to
qualify for a mortgage.
- If you are several months behind on mortgage payments, you might lack the time required – up to six months
– for a realtor to secure a contract and close the sale.
- The cost of repairs and/or cosmetic touch-ups needed to place your home on the market might be more than
you can afford in your current situation.
- You will need to move out of your house and secure another place for you and your family to live.
If you can find a lender who will refinance your current mortgage, and you can afford the new loan payments,
this is another good option to pursue.
Pros
- Refinancing your mortgage allows you to keep your house and restore your credit by making timely payments
on your new mortgage loan.
Cons
- If you cannot make your mortgage payments now and are already several months behind, it might be challenging
to find a lender willing to refinance your current mortgage.
- This is another good option.
- Owner Finance Homes recommends working with your current lender to determine if they would be willing to
work with you on a loan modification or another arrangement that would allow you to keep your house and
avoid foreclosure.
- To discuss your options for loan modification, contact the loss mitigation department and ask to speak to
a loss mitigation specialist.
Pros
- A loan modification allows you to continue to pay your current lender and stay in your house.
- Loan modification possibilities include: reducing payments; waiving some payments; paying only the
interest for a determined time; setting up short-term repayment plans to help you make up the deficit;
taking the payments you are currently behind on and adding them to the unpaid principal balance on the back
end of your mortgage.
Cons
- Most lenders have stringent requirements before approving a loan modification.
- Requirements can include: income level; length of time in current employment; minimal delinquency time in
current mortgage.
- Most people in a delinquency situation who do not feel they will be able to catch up will not qualify for
a loan modification.
- Loan modifications are noted on your credit report and can negatively affect your chances of getting a new
loan, credit card, or job.
This option is only a short-term solution.
Pros
- You make lower payments for a short time while you work to improve your financial situation.
- You keep your house, and your current mortgage agreement remains intact.
Cons
- You can end up back in the same situation within months after the forbearance agreement ends.
- Most lenders are not offering forbearance agreements to severely delinquent homeowners.
- Forbearance does not solve longer-term issues for those with extended financial challenges.
This option is preferable to foreclosure.
Pros
- In exchange for the deed, title, or ownership of your property, the lender and the mortgage company agree
to release you from your obligation.
- You avoid having a foreclosure on your credit report.
Cons
- A deed in lieu of foreclosure can reduce your credit score by as much as 200–300 points, and remain on
your credit report for 7–10 years.
- Can prevent you from obtaining a mortgage for up to seven years.
- Can negatively affect your chances of getting a new loan, credit card, or job.
- You will lose your house and will need to secure another place for you and your family to live.
This option is preferable to foreclosure, and could be the only one available to you.
Pros
- The lender agrees to release their lien on the property for less than the mortgage amount.
- The investor can negotiate with the lender to report the short sale to credit reporting agencies in a way
that minimizes the negative impact on your credit report.
Cons
- A short sale can reduce your credit score by as much as 100–200 points, and remain on your credit report
for up to seven years.
- Can negatively affect your chances of getting a new loan, credit card, or job.
- Can prevent you from obtaining a mortgage for up to two years.
- Your lender might request that you pay the “short” portion of the loan.
- The IRS could require you to pay taxes on the “forgiven debt” portion.
- This is a good option if your property is worth more than your outstanding mortgage balance.
- You go through a formal closing and sign the deed, title, or ownership over to the investor, who signs a
promissory note to pay you in the amount of your current mortgage payment.
- You hold a lien on the title against this promissory note.
Pros
- The investor makes all your back payments, gets you caught up on what you owe on the house, and makes all
your payments going forward.
- Allows you to avoid the negative impact of a foreclosure, a deed in lieu of foreclosure, or a short
sale.
- Your credit score improves as the investor catches up your back payments and makes regular payments to
your lender.
- If the investor does not make all the payments required in your agreement, you can repossess the
property.
- If you repossess the property, you benefit from any repairs and/or improvements the investor made.
Cons
- You can do this only if the house is worth more than your outstanding mortgage balance.
- You lose whatever equity you have in your property because you sell it to the investor only for the
outstanding mortgage balance.