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Life moves pretty fast, and sometimes it moves so fast that you find yourself behind on your mortgage payments. There are all kinds of reasons that people get underwater on a home loan in Tampa. One way to solve the problem is to sell a house that’s behind on payments.
Understanding your mortgage lender
Each mortgage servicer has one objective – to get that mortgage payment.
The foreclosure process is not something that mortgage lenders want to engage in, because by and large it means they didn’t get their mortgage debt back. What’s more, it’s best for the mortgage services to avoid the foreclosure process because they’ll potentially lose any profit they made from your interest rate.
Prospective buyers understand this. Even if you’re behind on mortgage payments, a mortgage servicer simply wants to get that mortgage payoff and get on with their banking. The remaining balance of the old house in Tampa you’re living in is all that matters for them.
Most mortgages are paid off in the traditional manner, but mortgage companies are accustomed to having to work with homeowners. Even in today’s market, homeowners can go underwater easily.
Selling a house is going to be a better deal for the lender than not selling your property if you can’t pay off the loan in the traditional way.
Working with real estate investors and agents
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No lender wants to deal with a property that is increasingly behind on mortgage payments.
When selling your house becomes the best option, you’ll want to either work with real estate agents or real estate investors. A real estate broker who is part of a national association will be able to help you negotiate loan modification on the property. That’s not always the best course of action for everyone.
Real estate agents can help you find the mortgage payoff amount, which will determine if a short sale transaction is the best way to avoid foreclosure proceedings. They’ll find out what the outstanding balance on the property is, as well as finding potential home buyers in Tampa to purchase your home. All of this will keep you away from a foreclosure proceeding.
If you work with a real estate investor, you’ll get a cash offer. Depending on what they offer, it could be more than your settlement statement from the bank and thus prevent you from having to pursue a short sale. A cash buyer will also give you a quick closing date.
Many investors look out for homeowners who are selling property when they’re behind on payments. This is because they can get a better deal than a traditional home sale offers.
Home buyers come in all shapes and sizes. Evaluate every potential buyer and look out for the best deal for your situation. Selling a house doesn’t have to be a battle!
Evaluate your financial situation
Everyone has a unique financial situation. Mortgage payments are generally one of the biggest expenses that a homeowner has every month.
Look at what else you’ve got going on. You’ll have to go through all the hassle of digging through your bank statements and figuring out who you owe money to, but it’s worth the effort. Many homeowners find that working with a credit counselor is a big help.
A credit counselor might work with you to go through old tax returns. They can help you figure out what’s in your best interest in a timely fashion. If you act quickly, you will definitely save money. If you don’t, your situation will be left unchanged.
There are other alternatives to letting your property go into foreclosure. It might mean moving to a new house, selling your house, or working to pay off debt with a new job. Selling your personal property to catch up is another option.
Often, people have more equity than they realize. Many buyers will find that their lender agrees to work with them, even if the goal is selling a house.
Is your home worth less or more than the mortgage?
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A major thing to consider is whether your home is worth less than is currently owed on the mortgage, or whether it’s worth more than what you owe.
When a home is worth less than what’s on the mortgage, that home is considered underwater. This means that the fair market value of the house is less than the balance owed on the mortgage. A home can be underwater if there are two mortgages and the sum total owed on both is greater than the fair market value of the house.
If your home is worth more than the amount owed on all the mortgages that are held by banks, then it’s not underwater! Though this is an easier scenario to handle than the reverse, it’s still a problem if you’re behind on your mortgage.
If you aren’t underwater yet and are just behind on your mortgage payments, then you can sell your house and use the profits to pay off the mortgage lender.
Steps before putting a pre foreclosure home on the market
Selling a house in preforeclosure is not that different from selling a house at any other time. What you decide to do to prepare the home for sale has everything to do with what you want the process to be.
If you need a quick home sale to get the cash and payoff the mortgage, you’ll want to pursue an as-is sale. However, if you’ve negotiated a change in terms and have a little time, then you might have time for a traditional sale path in Tampa.
With either, you’ll need to clean your personal belongings out of the home. It’s a good idea to get an inspection yourself if you are concerned about existing damage, as you’re required by law to disclose damage in any sale.
Don’t get bogged down in the details. It’s probably a smarter move to take less money for a quick, as-is sale than to take time to stage and prepare the home for a conventional home sale. Selling your house as-is is the fastest way to save your credit.
The traditional sale process
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The first thing that most people think of when they are getting ready to sell a house that’s behind on mortgage payments is the traditional sale process.
This involves finding a real estate agent who can work with you in Tampa, FL, then listing the home. The problem with this process is that it can take a few weeks to a few months to get through the home sale.
There’s no need to check with your mortgage company to sell your house in this way. That’s because the mortgage will be paid in full when the money changes hands at the closing table. With the mortgage balance paid, the home sale can go through.
What is a short sale?
If your mortgage is underwater, you’ll need to work with your lender to get the home sold and still satisfy the mortgage lender. The bank has to be in the loop on this kind of transaction, but the good news is that it can prevent foreclosure.
The reason it’s called a “short sale” is that you’ll end up being “short” on your final payment to the lender. Why would a mortgage company agree to this? Because a short sale is still preferable to a foreclosure. The bank is almost guaranteed to lose money in a foreclosure. In a short sale, they’ll often get more than they would otherwise.
The key here is that the bank has to agree to the lessened amount of payment for your home in Tampa, FL in order to go through with this type of home sale.
Negotiating a short sale
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Though the bank will likely come out on the better end of the deal with a short sale than they would with a foreclosure, not all banks are willing to do this kind of transaction.
Some lenders prefer short sale over the long process of foreclosure and repossession. This is because the hassle and litany of problems that comes with reselling the property is a big deal. Banks are not in the business of being homeowners. They’re in the business of lending money to homeowners.
Depending on the current market conditions and the amount that the bank will be shorted, they may or may not be willing to go on with this kind of deal. Short sales don’t always go through. Even if the mortgage balance includes extra fees and interest, the bank might come up too short to justify the sale for many mortgage lenders.
Along with the paperwork that the lender requires, you’ll likely be asked to submit a hardship letter. In this letter, you’ll explain why you are not able to make the payments on the property. You’ll also include things like income statements, medical bills, or other documentation to show that you do not have the means to continue paying the mortgage and must sell.
Most of the time, a lender will also want an appraisal with short sales. They want to make sure that you’re getting a fair deal for the house. Most of the time, real estate goes up in value. It’s unusual for a house to go underwater, but it’s more common than most people think.
A short sale is a fantastic option if you feel like you’ve run out of options to sell your house that’s behind on mortgage payments. Short sales take the pressure off and are a powerful way to prevent foreclosure sales.
Understanding your responsibilities
If you decide to pursue a short sale, you should know that the lender might ask you to agree to certain terms before they commit to the sale.
A lender might ask you to:
- Pay closing costs
- Cover wire transfers
- Pay notary fees
- Cover the cost of a home inspection
- Pay the title company
- Cover local fees
- Pay for repairs
These extra costs might be too much for you, especially if you’re struggling financially already. Know that the bank will likely ask for things in the negotiation process, but that doesn’t mean that you’re responsible for those extras just yet.
Work with the real estate agent that you’ve listed the home with or with the real estate investor who wants to buy the home to try to get the bank to agree to better terms. So much of the short sale process is about negotiating, so be prepared to go to the table.
Why go short sale instead of foreclosure?
The top reason to go for a short sale over a foreclosure is credit.
If you’re behind on payments on your home in Tampa, Florida, then every missed payment will amount to a hit on your credit score. However, nothing hits a credit score quite so hard as a foreclosure.
When you pursue a short sale instead of allowing the house to be foreclosed on, you’ll be able to preserve some of your credit score. This will allow you to buy another home in the future quicker than if your home is foreclosed on.
Another bonus when you go for a short sale is that you can stay in your house through the end of the sale process. There’s no foreclosure eviction, and you have some control over the timeline. With a foreclosure in Tampa, there’s no autonomy.
Finally, there is the issue of the shame of a foreclosure. When your home is foreclosed on, you’re totally powerless in the process. It’s something that’s done to you, rather than something you do for yourself. If buying a home is one of the most empowering things that you can do, having your home foreclosed on is one of the most disempowering things that can happen to you.
Other options if you’re behind on your mortgage
If you just want to delay the payments on your house in Tampa, you can look at lots of options. These will potentially give you the time to figure out how to sell your home, to make repairs, or to catch up and salvage your credit.
Here are some of the options you can check out on the road to selling your home:
- Mortgage forbearance
- Loan modification
- Loan deferment
All three of these options are possible even as you explore selling your property. Keep in mind that they may affect the payoff amount due to fees and interest. There is no easy answer when you’re behind on mortgage payments, but there is always some kind of answer.
The key to all of these options is to be open minded. Working with a credit counselor might be helpful, as it will give you an outside view of the process.
A mortgage forbearance is basically an extension of the grace period on the payments for your loan. This is granted in situations of financial hardship, for example if you have experienced job loss or a natural disaster.
In a forbearance, the lender works with an escrow company to keep your taxes and insurance up to date. All of those are important even if you’re exploring selling.
With a forbearance, your payments are set aside for a certain period of time. You still have to catch that up within the timeline allotted. The bank will work with you on how to catch up those missed payments, spreading them out over a period of time when the loan comes due again.
With a mortgage deferment, payments are moved to the end of the loan. It’s also called a partial claim, and it’s a more serious option than a mortgage forbearance. In a deferment, you’ll work with your lender to decide what timeline you’ll be on.
Keep in mind that all payments will be added to the end of the loan, and that interest might still accrue during the deferral period.
Mortgage loan modification
In both a deferment and a forbearance, the terms of the loan stay the same. The monthly payment, relative length of the loan (save the payments tacked on at the end with a deferment), and the interest rate all stay the same.
A loan modification is a much deeper dive and a much more serious change to the loan. If, because of whatever life change has occurred to push you behind on mortgage payments, you don’t see that you’ll be able to make those payments in the foreseeable future, you’ll need a loan modification.
This is something that you’d want to negotiate with your bank about.
Selling your home while getting mortgage relief
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Unless you’re pursuing a short sale, you don’t need the permission of your lender to sell your home at any time in Tampa, Florida. If you can find a buyer who is willing to pay more than the current balance on the mortgage, you can sell your home at any time.
Even if you are in the thick of the mortgage deferment process, getting a forbearance, or modifying your mortgage, you can sell your home. Whether you decide to work with a real estate agent for a traditional sale, or with a real estate investor for a quick cash sale, you’ll be in better shape than if you just watch your house get foreclosed upon. It’s even possible that you’ll make enough when you sell to have a down payment on a new home. If you haven’t waited too long and haven’t fallen very far behind on payments, you might be able to get yourself into a new home fast by selling your current home.