Going through foreclosure is never a pleasant experience. Even today, four years after the collapse of the housing market, Georgian homeowners experience a 1 in 532 rate of foreclosure. It’s one of the highest rates in the nation behind California, Nevada and Arizona where the housing collapse tsunami began. It can be a confusing and difficult process for many, but the good news is, it is much easier to navigate than you think.
The first thing you need to do is evaluate your options. You elect to go through a loan modification, a forbearance, a foreclosure, perform a short sale or simply walk away from the property. Each strategy have been employed by homeowners across the country with varying degrees of success. As it is with most things, whether you walk away, sell at a huge loss or go through foreclosure depends on your own personal situation. Some questions you need to answer include:
How much will each one damage my credit report & what are the long term effects of each action? We are going to focus on
A short sale is a way to be totally released from the debt and will damage your credit the least. Unfortunately, it’s may be the most expensive option in the short term especially if you want to have the least amount of damage to your credit, but most agree that it is better for your long term outlooks. Short sales are listed as “settled debts” on your credit report and thus don’t ding your overall score as much. To qualify for a short sale, you will have to be able to prove a hardship.
Foreclosure is the standard for most, but with the housing crisis, there is a glut of foreclosure petitions going through the courts. Because of that, finishing your foreclosure can take six to nine months. Every month that you aren’t paying your mortgage is a ding on your credit report that can take years to repair. In some cases, the banks can still pursue you for the deficit.
Finally, simply walking away and mailing the keys to the bank is a short, sweet and easy way out. Unfortunately, it’s also the most damaging to your credit report and financial future. Instead, try and look into whether your bank would be interest in receiving what’s known as “Deed in lieu of Foreclosure” proceeding. This is a great out, that gives you a nice compromise between foreclosure and walking away but it does linger on your credit report for a long time, so be cautioned about using this as a strategy. Many people file for bankruptcy after falling into foreclosure and the lender doesn’t consent to a short sale or deed in lieu of payment, so make sure you are exploring all your options.
How much money do I have on hand or realistically expect to make in the next few months?
Do you have enough money to make it through the next few months of a foreclosure sale? Do you still have your job or other benefits that you can live on while sorting out your situation? All these are things you should answer. The more money you have the better off you are in the short term, but make sure you have at least a six month buffer of resources on hand to help you through the lean times.
How much time do I have to devote to this?
Going through foreclosure or short sale process can be confusing. There are a lot of people who can help you understand your options and talk with you about all of your options to see what might be best for your particular situation. Yet it takes some time and diligence to have a successful outcome.
At Atlanta Housing Source, we have a team of experts from loan originators, attorneys, and real estate experts to help at no cost to you. Call Mark at 404.886.8789 to speak with him about how we might be able to help you.