2 years ago, the Federal Government passed a $700 Billion stimulus which was intended to stimulate the economy, keep people in their homes and provide mortgage modification tools. 2 years later, the homeownership situation in America is worse than it's ever been. Over 1 million people lost their homes to foreclosure in 2010 and another 1.5 million will lose their homes in 2011. The trend will most likely roll over to 2012 as the unemployment levels are and will remain in the double digits.
Homeowners in financial trouble can utilize programs implemented by the Federal, State and local Governments in order to to keep their homes. In addition, every mortgage lender has implemented similar programs to help their clients. But, even with all this help, people are still confused about what to do and how to take advantage of these programs. Many people pay thousands of dollars to agencies (most of the mortgage modification agencies are illegal) for services that they can do themselves for free. In another article I will write about how you can "use the system" to your advantage and keep your home at the end ... But, for now please check out these 3 options most commonly used by homeowners in trouble.
1. Mortgage Modification - call your lender and ask for a modification package which you will need to fill out. The application asks for your and your spouse's income and your monthly expenses. based on that information the lender will be able to modify the mortgage and provide you with a more comfortable monthly payment. Note: not all applications get accepted and you MUST be employed, receive social security benefits, pensions or any other monthly income that will not run out.
2. Stay at home, don't pay your mortgage - this option is done by most homeowners who don't have a steady source of income. Foreclosures take up to 2, or more years and homeowners decide to wait it out and hope that they can get a job in the near future. Once they are employed, they can start a modification process.
3. Short Sale - If you owe more than your property is worth, you can do a short sale. For example, if you owe $200K on your mortgage but your home is worth $150K, you can sell it for $150K, if mortgage holder agrees. The lender "eats" $50K, most likely writes it off as a loss and gains a qualified borrower. You on the other hand must report the $50K difference to the IRS and pay taxes on that amount. Make sure you consult with a tax professional for the exact procedures.