Top Five Resources for Upside Down Homeowners
Upside down in your home and facing difficult financial times? Take control of your situation today and exhaust all the resources available to you! Don’t know what those resources are? Well, I’ve gathered the top five resources here to help you get started.
- First, you need to know what kind of a loan(s) you have. If you have a Fannie Mae or Freddie Mac loan, you may qualify for either a refinance or loan modification through the Making Home Affordable Plan introduced earlier this year by President Obama. Click here for the Loan Look-Up Tool and find out if you have a Fannie Mae or Freddie Mac loan.
- Find out if you are eligible to refinance your home – yes, this is possible when you are upside down in your home (as long as your first mortgage does not exceed 105% of current market value). See the previous link for more eligibilty requirements).
- If you can’t refinance, find out if you can qualify for a loan modification. You don’t need to be delinquent in order to qualify for this program! See the previous link for more eligibility requirements.
- Contact a HUD-approved housing counselor to help you determine your eligibility, walk you through the documents your lender will need, and can sometimes contact your lender with you (by the way, this is a free service offered by HUD). Find a HUD-approved (not-for profit) housing counselor here.
- Contact your lender and open the lines of communication about your situation. Be sure to have your facts straight before you call so that you can give an accurate accounting of your financial situation. Each lender works a little differently – be prepared to be transferred around before you get to the right department (keep accurate notes of the date and time you called, who you spoke with, their contact information: phone, mail, fax, and email, the name of the department that they work in, and the outcome of your call). Don’t get discouraged if your first few calls don’t yield the response you were looking for. Be polite, but persistent and clarify or repeat back the information that the representative gives you so that you are sure you understand.
Each situation is different and presents different challenges and possible solutions. If you are overwhelmed with this process, don’t be afraid to ask for help. As a Certified Distressed Property Expert (CDPE), I can be an advocate for you and help connect you with a local CDPE to consult with you and walk you through the process. Know that you are not alone, there are many people who are in the same position as you and there is help! Contact me today and get started on the road to recovery!
“You Know You’re Caught When…” – Self Assessment
Being caught in financial distress is a hard realization and sometimes people don’t even recognize the warning signs. Let’s face it – the topic of finances is still the #1 source of stress and relationship discord. This self assessment quiz isn’t a solution, just a tool to help you take control of your financial situation and seek help if needed. Don’t be caught unaware, take control today!
You know you’re caught when… you have any of the following obvious signs:
- Job loss
- Loss/decrease in income
- Rate adjustment on your mortgage
- Already more than 30 days late paying your mortgage
- Negative amortization (your payments don’t include paying towards the principal)
You know you’re caught when you…
- Owe more on your mortgage than your home is worth
- Rely on credit cards to pay your monthly living expenses (Don’t have a budget? Sign up for my newsletter and I’ll send you a financial worksheet free so you can get started on monitoring your monthly expenses today!)
- Have rising household expenses (for example: rates on your credit cards have adjusted up, you have additional child care expenses, accrued medical debt, etc.)
- Experienced serious family illness or injury
- Going through a divorce or split of domestic partnership
If any of the previous statements are true, please take immediate action to take control of your financial future. If you need direction on how to get started, read on to our popular post “I’m Caught, Now What?“ If you have questions on your particular situation, please don’t hesitate to contact my team through my Contact page. We will prompty return your inquiry. This may be one of the hardest realizations, but it is possible to rebuild your life and financial future. The more time you delay, the further you have to climb to get out of your current situation. Start rebuilding today!
I’m Caught, Now What?
So, you’ve realized you ‘re caught in the housing bubble. You’re probably thinking, “Now what do I do?” If you’re caught in the housing bubble because you lost your job or have experienced a significant decrease in pay (maybe a paycut or forced un-paid vacation), please read the following post: “I Just Lost My Job, Now What?” I have a special set of instructions for you! Otherwise, read on.
Step #1 – Create or update your monthly budget
If you haven’t done this already, you must. A financial worksheet is going to be your tool to help you determine where you stand financially. In addition, your lender is going to need a copy of your financial worksheet in order to work with you. Before you pick up the phone to call your lender, make sure your worksheet is done. To get a copy of a financial worksheet for free, be sure to sign up for my newsletter and I’ll automatically send you a copy!
Step #2 – Determine your overall goal based on your financial worksheet
How far off is your monthly income from your monthly expenses? Are you in the red? Can you afford your home if you hunkered down, reduced your spending and received a reasonable reduction in your mortgage payment? If so, you most likely will want to pursue a loan modification with your lender(s). Remember that most lenders offer short term loan modifications by temporarily reducing your interest rate (3 – 5 years), thereby reducing your monthly payment for that length of time. I personally have not heard of any lenders currently offering principal reductions as part of a loan modification. But, it doesn’t hurt to ask. If you are seeking a loan modification please, please please do not fall victim to the scams that are out there promising principal reductions or guaranteed loan modifications for an upfront fee. You can work with your lender directly to obtain a loan modification. It may take some bulldogged persistance, but you can negotiate directly with your lender yourself. For more on pursuing a loan modification see “Do It Yourself Loan Modifications.”
Step #3- Know your options
If you realize you can’t afford your mortgage by cutting back your expenses and by getting a reduction in your monthly payment, you have the following options:
- Short Sale: a negotiated settlement in which your lender(s) agree to accept a payoff less than what is owed to them on the secured Note.
- Deed-In-Lieu of foreclosure: a process where the borrower deeds the collateral (the property) to the lender and thereby avoids foreclosure.
- Foreclosure: a legal process in which your lender repossess the property after it falls in default.
Step #4 – Call your lender
If you simply cannot afford your mortgage no matter the cuts you make, you need to pick up the phone and call your lender to discuss your alternative solutions. Most likely, your lender will recommend a short sale. This is by far the best option to pursue rather than a Deed-in-Lieu and Foreclosure. However, all three options have credit and legal consequences so be sure to contact your qualified professionals for specific advice. Your lender will usually do a phone qualification where they verbally run through your situation and your financial worksheet. That’s why it’s important to have it done before you talk to the lender so you can give an accurate accounting. From there, they will review your options and give instructions to you on what documentation they will need. For specifics on the short sale process, click here.
What you’re going through is not easy. It’s quite stressful and many of my clients have told me that it feels like a monkey on their back. However, they all say that once they took control of the situation, contacted their lender and set out on a course of action (whether it’s a loan modification or short sale) they all felt much more positive about their future and they could finally move on. It also helps to have the assistance of a team of professionals to assist you. If you’d like a free consultation with a highly qualified Realtor make sure to contact my team through our Contact Us page. Even if you aren’t located in the State of CA, we can still connect you through our extensive referral network. We look forward to assisting you!
