Behind On Your Mortgage? Want To Keep Your House? Follow These 5 Steps (Part 4)

by Tammy McHood

Step 5 – List Your House for Sale (Probably a Short Sale)
If you have done steps #1-4 and have not found a solution, it is time to be realistic and accept the fact that you are probably not going to be able to stay in your house forever when you are not making/can’t afford the payment. The best option at this point is to find a buyer for your house – even if the market value of your home is less than what you owe. If the market value of your home is less than what you currently owe on your home and you want to sell it, the best option is to list it as a “short sale” and you will want to be sure to find a Realtor who is experienced in doing short sales.

This person needs to negotiate on your behalf to have your lenders release some (or all) of your obligations so that you will be able to sell your home. Many Realtors avoid these kinds of transactions because they are difficult – so make sure you select someone with significant experience in this area.

If you end up in a short sale situation, be familiar with the tax implications involved in a short sale – this is something that your accountant can help you with.

Perhaps the most important point to consider no matter which step you are in during this process is to stay positive and solution-oriented. No matter if you are talking to your current lender, talking with other lenders about finding a different loan, talking to various other groups about foreclosure avoidance or listing your home for sale – you will have much more success in the process by focusing on the solution going forward and maintaining a positive attitude.

--Tammy

Other resources/articles on avoiding foreclosure:
Tips for avoiding foreclosure from HUD

Avoiding Foreclosure and Keeping Your Home – HUD

Comments

[Susan]

We already have a FHA loan that is over the value of the house. The ARM will increase in 6-months. It sounds like we cannot participate with FHA Secure because our current loan is already FHA?

[Tammy McHood]

Hi Susan,

Good question!

First of all, to directly answer your question, it is not possible that you can qualify for the FHA Secure program because you are currently in a FHA loan.

The FHA Secure program is for people who are NOT currently in an FHA loan and have an adjustable rate mortgage (along with having to meet a handful of other criteria).

That said -- there is one possible option that comes to mind... it is called the FHA Streamline program.

It is possible that you can qualify for the FHA Streamline program even though you may owe more than your house is worth -- IF and ONLY IF -- your new loan amount is lower than your original loan amount and you have less than 2 30-day late payments in the last 12 months.

With the FHA Streamline program, as long as your new loan amount is less than your original loan amount, you don't need an appraisal done -- so the value of your home doesn't come into play.

There are also a small handful of ARM-to-FIXED Streamline rules -- depending on what kind of FHA ARM you have. For example, if you currently have a 1-yr ARM, your new interest rate can't be more than 2% higher than your adjustable rate.

That said, be sure to look at your copy of your Mortgage Note (it should be in the packet of papers you got from the title company when you closed your loan) for when exactly your note adjusts and what index it is tied to.

It is quite possible in the current environment that your current FHA ARM could adjust DOWN, not up when the adjustment date occurs.

And finally -- a last note -- one more thing that may help you sleep better about being in an FHA ARM, if it does adjust up, the most that it can go up (or down) is 1% per year, which is usually something that borrowers don't end up losing their homes over because they can't afford the new payments.

I hope this answered your question, please let me know if I can be of further help!

-- Tammy