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September 28th, 2010 7:06 AM by David W. Welch
Which is best? I hear this all too often these days, and the first thing I tell everyone is to speak with an attorney who speacializes in this area. There are a number of options for people having trouble paying their mortgage. Obviously, the simplest is - make more money. In the current economy that is not so easy, and even savings accounts are drying up. The next option is sell the house and move into something more affordable. Unfortunately, with the oversupply of homes still on the market and lower prices this option is not available for many. Next in line comes the loan modification, if you are planning to stay in the area. This does not help those who may be moving for a job. It probably will not work if you have lost too much income or if you are currently in an interest only or adjustable rate mortgage. The modified loan will not be interest only or at the super low ARM indexed rates. I have heard time and again of people offered a loan modification that actually substantially raised their payment.
For those that cannot increase their income, lower their payment or sell their home for more than they owe, the options left are limited. The next step in the progression is a short sale. In a successful short sale, the bank agrees to accept less than what they are owed allowing the seller to get out of the house with minimal damage to their credit and possibly no tax liability. I have been following short sales for about two years now, and only 8%-10% of the pending short sales close each month. Some banks will accept a deed in lieu of foreclosure if you are unable to get an approved short sale. I do not know of any particular benefit to doing this. It is essentially a foreclosure, but without putting up a fight. Finally, when nothing else has worked having the property to go back to the bank in foreclosure is the only option that remains. If you are still living in the home, an attorney may be able to help you stay in the home a bit longer.
David Welch Real Estate Optimist, Orlando Real Estate, Any Home-Any Phone