Owe More Than Your Home is Worth – Now What?
If you own a home in a declining market such as South Florida, then you may have a rude awakening when you find out how much your house is worth in today’s market, especially if you need to sell or refinance in the near future. Some home owners have the flexibility to wait out this declining market, while many more don’t, for such reasons as divorce, relocation, financial hardship or an adjustable rate mortgage that just spiked up a few hundred dollars and home owners can no longer afford their home and may possibly face foreclosure.
For many, the thought of owning a home that is upside has turned their dream of home ownership to a nightmare of home ownership. If you are a homeowner that is currently facing this situation, then you will be glad to know that this article will reveal several different options that are available today, as I reveal some of the lenders best kept secrets of a SHORT SALE if you want to see and a SHORT REFINANCE if you want to keep your home.
It’s important to understand what Lenders care about, before they are approached for a short sale or short refinance. They only care about the bottom line, which is how much do you owe and how much cash they will receive if they agree to do a short sale or a short refinance.
Now what exactly is a short sale?
This is the option that you would want to go with if you decide you no longer want your home and would just rather sell, than try to find ways to keep your home. A short sale is when the lender agrees to reduce the amount you owe on your mortgage to an amount less than the current market value and low enough where it will be more attractive for someone to buy in today’s market.
What exactly is a Short Refinance?
This is the option that you want to consider if you decide you don’t want to move and you would like to keep your home. The benefits of the short refinance is that you will get a new low, 30 years fixed rate mortgage, typically an FHA Mortgage Loan and you will owe less than the current market value of your home. Yes, you heard me right, there is a way to refinance, even if you are upside down, but you have to have the ability to qualify for an FHA Mortgage Loan. If your credit is shot, then you may need to consider other options such as a Loan Modification.
Now you may be wondering why a lender would even consider these options as it appears they will be losing a lot of money. Well, the reason lenders agree to do a short sale or short refinance, is that they believe that if the property ends up in foreclosure, then they stand to lose a whole lot more, as the average foreclosure will cost a lender anywhere from $50,000- $100,000.
Now everyone’s situation is different, some lenders will agree to either the short sale or short refinance, while other may just agree to a short sale. It is best to find a mortgage expert that can help you navigate this process and make an educated decision, and even if you lender doesn’t agree to a short refinance and you really want to keep you home then there are other loss mitigation options that are available today, such as a loan modification.
Marlon Baugh
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