Monday, October 01, 2012
Best Time to Buy Foreclosures
So summer is behind you and all those crazy investors bought the homes they wanted and what you wanted but ended up being left puzzled as why you didn't come out with a home, right? Well good news - winter time is probably the best time to buy a home as first time home buyers will face little competition from just about everyone. Yes you'll see less terrific real estate homes, the gloomy weather is a turnoff but from experience winter has been good for me and my buyers finding the home they want with almost no other investors or home buyers bidding on the same home. Good Luck!
Monday, September 17, 2012
Real Estate Foreclosure: The Big Picture
For those who are unsure by the notion of investing or obtaining foreclosures for profit or simply to have a roof over your head, well don't be. Here's why.
You can easily break down the process of foreclosures into three primary stages. Ready?
The first stage is pre-foreclosure the second stage is foreclosure auction and the third and final stage is bank owned foreclosures or real estate owned properties as they're interchangeably called.
Traditionally speaking as you move along the timeline of the foreclosure process your potential for profit will decrease the later you get to the foreclosure a property. In other words there is probably much greater profit potential if you are able to identify a property right before it enters into the initial stages of foreclosure in a market that you are familiar with as opposed to calling up the bank for real estate owned properties.
Now let me shed light on one thing, this doesn't mean that one way of doing things is better than another. It's actually a bit more complicated than that. It depends on what you're looking for when all is said and done. If you're planning on making a full-time living eventually from real estate investment then you'll definitely want to learn in baby steps how to get the most out of your time and efforts.
With that said for those who are eager enough to do this full time you will want to learn how to find pre-foreclosures because they generally offer you the maximum leverage and profitability relative to the most deep marked down properties available via bank owned properties
However if you are simply looking for a deep discount at home without wanting to start an entire business involving marketing, distribution, and promoting yourself while driving around neighborhoods every day looking up MLS listings conducting market research and paying all all the costs overlays involved in running a business, then it is unquestionably advisable if you are looking to simply purchase a more inexpensive home to come to call up the bank for a foreclosure property.
You can easily break down the process of foreclosures into three primary stages. Ready?
The first stage is pre-foreclosure the second stage is foreclosure auction and the third and final stage is bank owned foreclosures or real estate owned properties as they're interchangeably called.
Traditionally speaking as you move along the timeline of the foreclosure process your potential for profit will decrease the later you get to the foreclosure a property. In other words there is probably much greater profit potential if you are able to identify a property right before it enters into the initial stages of foreclosure in a market that you are familiar with as opposed to calling up the bank for real estate owned properties.
Now let me shed light on one thing, this doesn't mean that one way of doing things is better than another. It's actually a bit more complicated than that. It depends on what you're looking for when all is said and done. If you're planning on making a full-time living eventually from real estate investment then you'll definitely want to learn in baby steps how to get the most out of your time and efforts.
With that said for those who are eager enough to do this full time you will want to learn how to find pre-foreclosures because they generally offer you the maximum leverage and profitability relative to the most deep marked down properties available via bank owned properties
However if you are simply looking for a deep discount at home without wanting to start an entire business involving marketing, distribution, and promoting yourself while driving around neighborhoods every day looking up MLS listings conducting market research and paying all all the costs overlays involved in running a business, then it is unquestionably advisable if you are looking to simply purchase a more inexpensive home to come to call up the bank for a foreclosure property.
Monday, September 10, 2012
The Most Critical Aspect Of The Short Sale
Good news. As a real estate investor, you’ve found a home in pre-foreclosure. You know the owner has missed three mortgage payments, and he now owes the bank more than he can sell his home for.
With the bank poised to begin the foreclosure process, you’re ready to step in and begin negotiating a short sale. You’re ready to convince the bank to take less on the property than is owed in order to save the homeowner’s credit, save the bank time and money in lawyer’s fees and court costs and buy yourself a property at a great price.
But before you can begin the negotiation process with the bank, you must first take the most crucial step in the short sale process. Unless you do this, any fee you negotiate with the bank is irrelevant. Do you know what I’m talking about? If not, you better keep reading.
The one step you never want to overlook is getting the property under contract with the seller.
You could do everything else right. You could determine that the house is worth the remainder of the mortgage: $85,000. Only it needs $15,000 in repairs to get it’s real value to $85,000. And you have estimates from reputable contractors to prove that the purchase price of $50,000 is indeed the as is value. (Don’t forget to leave room for your profit!)
You have done your homework so well that the bank wants to take the $50,000 and avoid the year and a half foreclosure process and expense. Now this property is on the verge of becoming yours at an amazing price.
If, however, the owner hasn’t signed a contract giving you permission to negotiate the short sale with the bank, you have no authority whatsoever. Although the owner is not current on his payments, he is still the owner of the property. As the owner, he has to authorize you to make the sale.
So how do you get the owner to sign a contract?
Simply approach him with the same numbers you would take to the bank. Show him how selling the property for less than its worth will benefit him. Show him how it will keep a foreclosure off his credit report as well as prevent him from owing back payments, legal fees, interest and penalties.
When he agrees to your deal, get him to sign a contract authorizing you to buy the property by way of a short sale. Then–and only then–do you approach the bank with your negotiation tactics.
Keep in mind that vacant houses in pre-foreclosure are tougher to deal with. Because you have to track down the owner. He may be living with a sister, a friend, a parent or any number of other options that are not easy to track.
Just remember that taking the time and making the effort to get a signed contract are well worth it. For that contract with the owner is the most critical aspect of a short sale.
With the bank poised to begin the foreclosure process, you’re ready to step in and begin negotiating a short sale. You’re ready to convince the bank to take less on the property than is owed in order to save the homeowner’s credit, save the bank time and money in lawyer’s fees and court costs and buy yourself a property at a great price.
But before you can begin the negotiation process with the bank, you must first take the most crucial step in the short sale process. Unless you do this, any fee you negotiate with the bank is irrelevant. Do you know what I’m talking about? If not, you better keep reading.
The one step you never want to overlook is getting the property under contract with the seller.
You could do everything else right. You could determine that the house is worth the remainder of the mortgage: $85,000. Only it needs $15,000 in repairs to get it’s real value to $85,000. And you have estimates from reputable contractors to prove that the purchase price of $50,000 is indeed the as is value. (Don’t forget to leave room for your profit!)
You have done your homework so well that the bank wants to take the $50,000 and avoid the year and a half foreclosure process and expense. Now this property is on the verge of becoming yours at an amazing price.
If, however, the owner hasn’t signed a contract giving you permission to negotiate the short sale with the bank, you have no authority whatsoever. Although the owner is not current on his payments, he is still the owner of the property. As the owner, he has to authorize you to make the sale.
So how do you get the owner to sign a contract?
Simply approach him with the same numbers you would take to the bank. Show him how selling the property for less than its worth will benefit him. Show him how it will keep a foreclosure off his credit report as well as prevent him from owing back payments, legal fees, interest and penalties.
When he agrees to your deal, get him to sign a contract authorizing you to buy the property by way of a short sale. Then–and only then–do you approach the bank with your negotiation tactics.
Keep in mind that vacant houses in pre-foreclosure are tougher to deal with. Because you have to track down the owner. He may be living with a sister, a friend, a parent or any number of other options that are not easy to track.
Just remember that taking the time and making the effort to get a signed contract are well worth it. For that contract with the owner is the most critical aspect of a short sale.
Monday, September 03, 2012
Negotiating A Short Sale – The High Road To Huge Foreclosure Profits
Buying foreclosures can be extremely profitable for real estate investors. However, most of these homeowners are mortgaged to the hilt. They have no equity, and big loan payments. In fact, many actually owe more than the property is worth!
Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.
What is a Short Sale?
The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy - buy the foreclosure from the bank at a big discount, sell the real estate, and make money!
How to Negotiate the Short Sale with the Mortgage Holder
Once you have your secured a contract with the homeowner and have your paperwork in order, you'll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn't mean that the bank will just roll over and do your bidding.
Understand the Bank's Perspective
With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage - sell them the benefits of your short sale.
Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.
As the investor, keep these benefits at the top of your mind. After all, it's up to you to convince the lender that cutting their losses short is the best option.
It's time to hone your negotiating skills. Here are 3 Steps to help you out.
Step 1: Have Your Paperwork Ready
There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).
Since many of these forms have to be signed by the homeowner(s), it's best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:
· Authorization to Release Information (homeowner's permission for the bank to speak to you)
· Purchase and Sale Agreement
· Hardship letter (showing why the homeowner can't make the mortgage payments)
· Financial statement (showing the assets, liabilities, incomes & expenses)
· Estimated HUD1 or Net sheet (showing the bank what they will get)
Second, find out if the lender has a package they want completed. You can do this usually by calling the lender and asking them to fax you the package. Get the lender information from the homeowner in a phone call, so you can get the package before you go out to the house.
Step 2: Approaching the Loss Mitigation Department:
One of the first challenges you'll face with the bank is getting your call to the right person. Some banks have systems set up in a way that when you call put in the homeowner's account number, the call transfers to the appropriate department.
If the bank doesn't have a system like this, call around to find the Loss Mitigation Department. Many banks have different names for this department, so you may spend some time getting bounced around. Other names to try out are “foreclosures department”, “short sale” department, or “loan modification” departments.
Make sure you introduce yourself and be nice, polite, and patient when you reach the right person. This is the person that can make or break your deal. It's helpful to have some form of a script in front of you to get the conversation.
When you speak with them, make sure you cover the following:
· Introduce yourself.
· Name the homeowner, the account number, and the fact that you represent them.
· Ask for the fax number.
· Let them know you're faxing over an “authorization to release information” so that the loss mitigator can talk to you.
· Stay on the phone as you fax this information.
· Explain to them that you're interested in a short sale.
Once they have the paperwork in front of them, the negotiations begin.
Step 3: Begin Your Negotiations
Every bank has its own personality and approach when it comes to short sales. Some teach their employees to at least show resistance up front. One reason for this is that many investors call them expressing interest in a short sale, with no clue how to do it! These loss mitigators usually have about 80 to 300 files on their desk. They just don't have the time or desire to teach you! Let them know you don't need them to!
Many new investors have been advised to not reveal that they intend to invest in a property. However, it is better to be upfront and let them know that you are an investor, and you are buying the property.
Being honest and upfront allows both parties know what is required of them, and what needs to be negotiated.
While speaking with a loss mitigator, make sure to emphasize the following points:
1. You're an investor and you know what you're doing. Although you do want to make profit, let them know you're not out to steal the property from them.
2. You understand that they are busy and appreciate the valuable time they are spending to negotiate with you. Find out what will make it easier on them.
3. Remember your selling points. The bank wants to avoid the homeowner filing bankrupty, and the bank needs to unload unwanted property without taking a huge loss. (And yes, while you are in it to make a profit, you're not trying to rip them off! You're just trying to use your expertise to do what you're good at.)
4. A short-sale is a win-win situation for everyone!
Once you have spoken to the loss mitigation department and given them your paperwork, the lender will need information about the property, the borrower and the deal that you are proposing. If the person you are speaking with tries to test your resistance, make sure you answer as many questions as thoroughly as possible to let them know you are a professional. Hang in there, answer and ask as many questions as possible, and they'll be more apt help you out along the way and walk you through what it is that you need to do.
The most important fact that the broker needs to know is: How much is the property worth? Banks usually hire a real estate broker or appraiser to evaluate the property. This is called a broker's price opinion or “BPO”. The BPO is one of the largest hurdles you need to clear when perfecting your short sale negotiations. In the next article, you'll learn the in's and out's of the BPO and how to negotiate the BPO down to create profit for your short sale.
Go to http://www.InvestorWealth.com for these Real Estate Profit Secrets: * Super Success Short Sale Secrets (*Best Course) * Deal Evaluation Tool * Free Teleseminars on the latest and most effective real estate profit techniques
Most investors will walk away from these deals because they see no obvious profit. However, you can “create” your own equity by negotiating a “Short Sale” with the bank or lender.
What is a Short Sale?
The concept behind the short sale is simple: your goal as a real estate investor is to convince the bank to sell for less that is owed as payment in full. Of course, this concept is easy - buy the foreclosure from the bank at a big discount, sell the real estate, and make money!
How to Negotiate the Short Sale with the Mortgage Holder
Once you have your secured a contract with the homeowner and have your paperwork in order, you'll be ready to deal with the loss mitigation department of the bank. Short Sales success relies on dealing with the loss mitigation department at the bank. Although most lenders look at short sales as a necessary evil within the lending industry, that doesn't mean that the bank will just roll over and do your bidding.
Understand the Bank's Perspective
With foreclosures at a 52-year high, the loss mitigation department at the bank is busy, if not highly overworked. Turn this disadvantage into an advantage - sell them the benefits of your short sale.
Short sales contracts help lenders unload unwanted property and spare many expenses associated with the foreclosure process. These expenses include, but are not limited to, court costs, bankruptcies, repairs and marketing. This is in addition to the $300,000 to $800,000 (or more!) normally held in reserve by lenders. Federal regulations require this reserve, which is usually many times over the actual price of the bad debt.
As the investor, keep these benefits at the top of your mind. After all, it's up to you to convince the lender that cutting their losses short is the best option.
It's time to hone your negotiating skills. Here are 3 Steps to help you out.
Step 1: Have Your Paperwork Ready
There is paperwork that all lenders will require in order for you to submit your offer for the short sale. Second, many of the larger institutional lenders have their own short sale package (their own forms to be filled out and signed).
Since many of these forms have to be signed by the homeowner(s), it's best to have them with you when you meet with the homeowner to work out a deal. At a minimum you should have the homeowner fill out and/or sign:
· Authorization to Release Information (homeowner's permission for the bank to speak to you)
· Purchase and Sale Agreement
· Hardship letter (showing why the homeowner can't make the mortgage payments)
· Financial statement (showing the assets, liabilities, incomes & expenses)
· Estimated HUD1 or Net sheet (showing the bank what they will get)
Second, find out if the lender has a package they want completed. You can do this usually by calling the lender and asking them to fax you the package. Get the lender information from the homeowner in a phone call, so you can get the package before you go out to the house.
Step 2: Approaching the Loss Mitigation Department:
One of the first challenges you'll face with the bank is getting your call to the right person. Some banks have systems set up in a way that when you call put in the homeowner's account number, the call transfers to the appropriate department.
If the bank doesn't have a system like this, call around to find the Loss Mitigation Department. Many banks have different names for this department, so you may spend some time getting bounced around. Other names to try out are “foreclosures department”, “short sale” department, or “loan modification” departments.
Make sure you introduce yourself and be nice, polite, and patient when you reach the right person. This is the person that can make or break your deal. It's helpful to have some form of a script in front of you to get the conversation.
When you speak with them, make sure you cover the following:
· Introduce yourself.
· Name the homeowner, the account number, and the fact that you represent them.
· Ask for the fax number.
· Let them know you're faxing over an “authorization to release information” so that the loss mitigator can talk to you.
· Stay on the phone as you fax this information.
· Explain to them that you're interested in a short sale.
Once they have the paperwork in front of them, the negotiations begin.
Step 3: Begin Your Negotiations
Every bank has its own personality and approach when it comes to short sales. Some teach their employees to at least show resistance up front. One reason for this is that many investors call them expressing interest in a short sale, with no clue how to do it! These loss mitigators usually have about 80 to 300 files on their desk. They just don't have the time or desire to teach you! Let them know you don't need them to!
Many new investors have been advised to not reveal that they intend to invest in a property. However, it is better to be upfront and let them know that you are an investor, and you are buying the property.
Being honest and upfront allows both parties know what is required of them, and what needs to be negotiated.
While speaking with a loss mitigator, make sure to emphasize the following points:
1. You're an investor and you know what you're doing. Although you do want to make profit, let them know you're not out to steal the property from them.
2. You understand that they are busy and appreciate the valuable time they are spending to negotiate with you. Find out what will make it easier on them.
3. Remember your selling points. The bank wants to avoid the homeowner filing bankrupty, and the bank needs to unload unwanted property without taking a huge loss. (And yes, while you are in it to make a profit, you're not trying to rip them off! You're just trying to use your expertise to do what you're good at.)
4. A short-sale is a win-win situation for everyone!
Once you have spoken to the loss mitigation department and given them your paperwork, the lender will need information about the property, the borrower and the deal that you are proposing. If the person you are speaking with tries to test your resistance, make sure you answer as many questions as thoroughly as possible to let them know you are a professional. Hang in there, answer and ask as many questions as possible, and they'll be more apt help you out along the way and walk you through what it is that you need to do.
The most important fact that the broker needs to know is: How much is the property worth? Banks usually hire a real estate broker or appraiser to evaluate the property. This is called a broker's price opinion or “BPO”. The BPO is one of the largest hurdles you need to clear when perfecting your short sale negotiations. In the next article, you'll learn the in's and out's of the BPO and how to negotiate the BPO down to create profit for your short sale.
Go to http://www.InvestorWealth.com for these Real Estate Profit Secrets: * Super Success Short Sale Secrets (*Best Course) * Deal Evaluation Tool * Free Teleseminars on the latest and most effective real estate profit techniques
Monday, August 27, 2012
Foreclosure – Can Foreclosures be stopped
It is everyone’s dream to own a home or built a house for his or herself. There are a few who are fortunate enough to secure one paid in full while many others try to buy one through financing or securing loans.
However, even you are religiously saving for the so-called rainy days and even if you have sufficient finances, there would come a time that you would find it difficult to face up to your obligations. Sicknesses in the family, a possible retrenchment at work or emergency purchases are unexpected instances where you could find yourself in arrears with your payment and then suddenly you are now facing foreclosures.
When legalities come into play in your financial situations or mortgages, it means that your predicament is deep serious. Foreclosures are one of those legal terms that everyone detests, especially the homeowners and the financers or banks themselves.
In exchange for lending the money, the lender would hold a lien against the property, If the borrower does not make the required payments, then the loan goes into default and the lender could exercise the lien against the property, in order to take legal possession of the property for the purpose of selling the property to pay off the borrower’s loan. This process is called foreclosure.
CAN FORECLOSURES BE STOPPED
HOW TO STOP FORECLOSURES
Aside from the obvious reason of not paying their loans on time, homeowners get into foreclosures, even if they have avenues to explore, simply by ignoring calls or letters from their banks and lenders or just simply giving up on his/her property in the hope that the tide of things would turn favorable on them.
Although foreclosures are eventualities in securing homes through financing, it does not mean that this could not be stopped or remedied. The matter hinges on the homeowners themselves if they want to keep the property for sentimental reasons or just simply foreclose it and just face the consequences of their action, notably severe damage to one’s credit rating.
If you are delayed in payments to your mortgages and there is no relief in sight, in the immediate or near future, then you have to put the problem in perspective and make a contingency plan or efforts.
The standard measure of keeping or selling the property is that if your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of your gross monthly income, consider selling or transferring the property to avoid negative impacts on your credit. This option would more likely be the path to be taken by borrowers who have equity in the property. By selling the property, the borrower could then pay off the mortgage, and pocket the difference if there is equity remaining.
If the financial setback is temporary and you need immediate money to make your loan current so that you could continue paying your debts, it is best to approach family and friends instead of hard money loans since they would lend money based on equity in the property. Just make sure to pay off your loans to your relatives or close friends for it is much difficult to have them foreclose on you to get their money back.
The best and simple solution to foreclosure proceedings is to deal directly with the situation. Be brave enough to talk with your banks or lenders and explain your situation. Remember, they do not want to foreclose on you they just simply want their money back plus interest. By exploring this angle, the lender and the borrower may arrive at a common ground to work on and resolve the situation in a way that is agreeable to both parties. The Loss Mitigation Department would deal on cases like this.
Basic lending guidelines would require all home loans would total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinancing deals or second trust deed to bring your loan current. Expect higher interest rates and loan fees.
There are several other alternatives available to you depending on the situations of the borrower, laws of the state and policies of the lender. You may consider forbearance, refinancing, modification, deferral of principal, a temporary indulgence and a Chapter 13 Bankruptcy.
In applying forbearance, your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender that there is a temporary problem and it would be resolved in the near future and show that you would be able to meet the requirements of the new payment plan.
A similar portion is deferral of principal in which the borrower agrees to pay the interest only for a certain period of time and then making the usual monthly payments. But just like in forbearance, this is very difficult to obtain unless the bank is familiar with the borrower or the borrower has an excellent credit stature in the bank.
If you have recovered from a financial problem you may able to apply for a mortgage modification. This process involves renegotiating the terms of debt and/or extends the term of your mortgage loans, changing the interest rates or additional surcharges to the principal with the current lender. This may help you catch up by reducing the monthly payments to a more affordable level. Refinancing, on the other hand, means that the borrower obtains a new mortgage with a different lender; the operative word here is different. As much as possible this alternative should be avoided since it would make your problems worse for borrowers in distress would tend to agree to onerous terms just to get a lease on their loans.
A chapter 13 Bankruptcy could be another option for it gives the borrower the time to “re-organize” his finances and work out a payment plan prior to resumption of payment. This would help keep the property and not blemish your credit rating compared to a Chapter 7 Bankruptcy, which completely discharges any debt the borrower had accumulated under the mortgage.
As a last resort, you may able to voluntarily “give back” your property to the lender or a “deed in lieu of foreclosure.” This would not save your house, but it is not as damaging to your credit rating as a foreclosure. This may be availed of if the borrower is in default and do not qualify for any other options and your attempts at selling the house before foreclosures were unsuccessful.
In some other states, there are laws and other options that are available to borrowers with mortgage problems. There is the option of reinstatement which means that the borrower brings the foreclosed mortgage current, including all overdue amounts, as well as fees and costs. Likewise, there is the co-called redemption, however it is usually limited in how often he or she could take advantage of this option and this is limited to some states.
A foreclosure procedure takes a long time to materialize and homeowners are given the chance to bail themselves out of their predicament. Sometimes the best defense against foreclosure is just to make a response on their inquiries or demand letters. Ultimately, the only thing that would stop foreclosure proceedings is repayment of the debt, for every option mentioned here is just a delay in the proceedings.
For More Specific General explanation of Foreclosure procedure in your state.
However, even you are religiously saving for the so-called rainy days and even if you have sufficient finances, there would come a time that you would find it difficult to face up to your obligations. Sicknesses in the family, a possible retrenchment at work or emergency purchases are unexpected instances where you could find yourself in arrears with your payment and then suddenly you are now facing foreclosures.
When legalities come into play in your financial situations or mortgages, it means that your predicament is deep serious. Foreclosures are one of those legal terms that everyone detests, especially the homeowners and the financers or banks themselves.
In exchange for lending the money, the lender would hold a lien against the property, If the borrower does not make the required payments, then the loan goes into default and the lender could exercise the lien against the property, in order to take legal possession of the property for the purpose of selling the property to pay off the borrower’s loan. This process is called foreclosure.
CAN FORECLOSURES BE STOPPED
HOW TO STOP FORECLOSURES
Aside from the obvious reason of not paying their loans on time, homeowners get into foreclosures, even if they have avenues to explore, simply by ignoring calls or letters from their banks and lenders or just simply giving up on his/her property in the hope that the tide of things would turn favorable on them.
Although foreclosures are eventualities in securing homes through financing, it does not mean that this could not be stopped or remedied. The matter hinges on the homeowners themselves if they want to keep the property for sentimental reasons or just simply foreclose it and just face the consequences of their action, notably severe damage to one’s credit rating.
If you are delayed in payments to your mortgages and there is no relief in sight, in the immediate or near future, then you have to put the problem in perspective and make a contingency plan or efforts.
The standard measure of keeping or selling the property is that if your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of your gross monthly income, consider selling or transferring the property to avoid negative impacts on your credit. This option would more likely be the path to be taken by borrowers who have equity in the property. By selling the property, the borrower could then pay off the mortgage, and pocket the difference if there is equity remaining.
If the financial setback is temporary and you need immediate money to make your loan current so that you could continue paying your debts, it is best to approach family and friends instead of hard money loans since they would lend money based on equity in the property. Just make sure to pay off your loans to your relatives or close friends for it is much difficult to have them foreclose on you to get their money back.
The best and simple solution to foreclosure proceedings is to deal directly with the situation. Be brave enough to talk with your banks or lenders and explain your situation. Remember, they do not want to foreclose on you they just simply want their money back plus interest. By exploring this angle, the lender and the borrower may arrive at a common ground to work on and resolve the situation in a way that is agreeable to both parties. The Loss Mitigation Department would deal on cases like this.
Basic lending guidelines would require all home loans would total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinancing deals or second trust deed to bring your loan current. Expect higher interest rates and loan fees.
There are several other alternatives available to you depending on the situations of the borrower, laws of the state and policies of the lender. You may consider forbearance, refinancing, modification, deferral of principal, a temporary indulgence and a Chapter 13 Bankruptcy.
In applying forbearance, your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender that there is a temporary problem and it would be resolved in the near future and show that you would be able to meet the requirements of the new payment plan.
A similar portion is deferral of principal in which the borrower agrees to pay the interest only for a certain period of time and then making the usual monthly payments. But just like in forbearance, this is very difficult to obtain unless the bank is familiar with the borrower or the borrower has an excellent credit stature in the bank.
If you have recovered from a financial problem you may able to apply for a mortgage modification. This process involves renegotiating the terms of debt and/or extends the term of your mortgage loans, changing the interest rates or additional surcharges to the principal with the current lender. This may help you catch up by reducing the monthly payments to a more affordable level. Refinancing, on the other hand, means that the borrower obtains a new mortgage with a different lender; the operative word here is different. As much as possible this alternative should be avoided since it would make your problems worse for borrowers in distress would tend to agree to onerous terms just to get a lease on their loans.
A chapter 13 Bankruptcy could be another option for it gives the borrower the time to “re-organize” his finances and work out a payment plan prior to resumption of payment. This would help keep the property and not blemish your credit rating compared to a Chapter 7 Bankruptcy, which completely discharges any debt the borrower had accumulated under the mortgage.
As a last resort, you may able to voluntarily “give back” your property to the lender or a “deed in lieu of foreclosure.” This would not save your house, but it is not as damaging to your credit rating as a foreclosure. This may be availed of if the borrower is in default and do not qualify for any other options and your attempts at selling the house before foreclosures were unsuccessful.
In some other states, there are laws and other options that are available to borrowers with mortgage problems. There is the option of reinstatement which means that the borrower brings the foreclosed mortgage current, including all overdue amounts, as well as fees and costs. Likewise, there is the co-called redemption, however it is usually limited in how often he or she could take advantage of this option and this is limited to some states.
A foreclosure procedure takes a long time to materialize and homeowners are given the chance to bail themselves out of their predicament. Sometimes the best defense against foreclosure is just to make a response on their inquiries or demand letters. Ultimately, the only thing that would stop foreclosure proceedings is repayment of the debt, for every option mentioned here is just a delay in the proceedings.
For More Specific General explanation of Foreclosure procedure in your state.
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