Understanding Loan Modification

Being a home owner is a dream for many people. Unfortunately, there may be times of hardship throughout your lifetime. Maybe you lost employment or simply have more expenses to cover. If you find yourself struggling with your mortgage payment, a loan modification might be a great option to avoid losing your home. Following, details what a loan modification is and the average timeline.

What is a Loan Modification

The purpose of a loan modification is to decrease your mortgage payments to an amount you are capable of paying. There are several different ways a modification can occur. The following options will be based on a 30 year, 150,000 loan at 6% with a monthly payment of $899.33.

·       Extended Payment Terms: In this scenario, you will not experience a change in interest or principal. You simply extend the total time of the loan. Changing your loan from 30 years to 40 years will decrease your monthly payment to $825.32.   

·       Interest Rate Reduction: A common loan modification is decreasing the interest rate for a certain amount of time. This is a great option for a temporary situation. This scenario, can decrease your interest rate from 6% to 4.5%. Your monthly payment would drop to $760.03. However, if you need a permanent interest rate reduction, you more than likely will need to refinance. 

·       Reduce Amount of Principal: This option is one of the less successful ones. Basically, your lender reduces the amount of principal owed. You are not expected to repay the amount deducted.

How Long Does a Loan Modification Take?

The amount of time it takes to complete a loan modification varies with every situation. According to loansafe.org, the entire process can take 2 months to 2 years. It is hard to calculate an exact number. This is why you should be aware of all options available for your situation.

A loan modification is a good option in many scenarios. The success rate is unique to every situation. Many factors are considered, so you should always consult with a real estate professional.

Should I Sell My House to Avoid Foreclosure?

Although few home owners think about the potential of foreclosure when signing the paperwork for their mortgage, it is a reality that many must face when money becomes tight. In many instances, selling your home to avoid foreclosure can be an excellent strategy, especially since the alternative, which is typically bankruptcy, can leave your credit rating damaged for years.

Consider Alternative Options

In most situations, the only way to generally avoid foreclosure if missing payments has become imminent is a short sale. Short sales often end with you losing a significant portion of the money you have invested into the mortgage, as the only way to attract a buyer in such a short period of time is to list the property well under the current market value for similar homes in the area. Some alternatives to this option include negotiating a lower monthly mortgage payment with your lender or a period where it is acceptable for no payments to be made, as long as the amount owed is added on to future payments. Another option is to find a renter who will either agree to rent the entire home or sublease while you are still living there.

List the Home if its Value is Higher than the Amount you Owe

A short sale is a tactic which is typically utilized if the value of the home is lower than the amount currently owed. However, if the value of the home is higher than the amount you owe, it makes more financial sense to put it on the market for full price and take your chances with finding a buyer. According to SFGate, "List the house on the market immediately if the value of the house is equal to or greater than the balance of your mortgage. If the value of the house is considerably lower than the amount you owe, you should speak to your lender about a short sale."

Investors Who Buy Homes Can Take Your Problem Off Of Your Hands

If you own a home that has a lot of problems, you might be ready to get rid of it as soon as possible. Maintaining a home can be expensive enough already, and it can really become a drain if the home has a lot of issues.

There is no reason to keep putting yourself through all of the stress and financial hardship of owning a home that's in poor condition when there are investors who buy homes just like yours for cash.

Putting a home that has a lot of problems on the market can be challenging. You might have to wait a long time to find someone who is interested in buying it. In the meantime, you'll have to pay the taxes and otherwise deal with the problems associated with the house. Plus, you might not end up getting a lot for it anyway, which can make it all seem as if it isn't worthwhile.

By selling your home to an investor, you can get money right away for the home. Then, you won't have to worry about the house anymore, and you won't have to spend months or years trying to find a buyer. You'll have a big problem off of your hands in no time, and you'll be able to take the money to invest in a better house. It really is a win-win situation.

If you're looking to get rid of your problem home, contact us at We Buy Your Austin Home. If you have a home in the Austin area that you want to get rid of, we can help you.

Strategies to Help Stop Foreclosure

Many people will do anything to avoid the foreclosure of a home they have been living in for a large portion of their lifetime. While avoiding foreclosure can be challenging, it is possible if the proper financial options are utilized. By learning how to stop foreclosure, keeping the house of your dreams should be achievable.

Take Advantage of Available Government Loan Support

For those who decided to take out an adjustable rate mortgage on their home, it may be impossible to afford monthly payments when the interest rate goes up due to market forces. Thankfully, government programs exist to help ease the stress that this can cause on the average homeowner. According to Street Directory, "The government provides FHA-insured refinancing loans to qualified homeowners who may be facing foreclosure due to adjustable-rate mortgages or interest-only mortgages that are set to reset. This program is available to anyone who has a non-FHA insured loan, regardless of their payment history. You also have the ability to roll your first and second mortgage into a single FHASecure loan."

Set up An Agreement with the Lender

Most lenders are flexible when it comes to setting up agreements that prevent foreclosure from occurring. Lenders tend to lose a lot of money in the foreclosure process, so they are typically willing to work with a homeowner in order to prevent it from occurring. Options include a forbearance agreement that freezes payments until your finances are back in order, a repayment plan that allows for missed payments to be paid back over time or a partial claim where the lender loans you the necessary money to make payments interest free.