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Four Ways Distressed Homeowners Can Start Fresh

News | 12th Jul 2012

If you’re a seller on today’s market, the dynamics underlying the demand are much less important than the fact that your chances of getting your home sold at a good price are better than they have been in a long time. For the first time in a long while, buyers are not faced with the double-edged sword prospect of buying into a declining market; appraisals are coming in at the agreed-upon purchase price; and mortgage rates are still really low. Many are still upside down and  struggling to make high payments on loans that went into foreclosure or short sale. For those homeowners, here are four routes to a fresh start:

Sell Your Underwater Home

Walking away is sometimes the best thing that you can do to get a fresh start.  There are  thousands of homeowners out there with homes that lost value during the recession who are still holding on to sub-prime loans that have long since reset. The current market may present a good opportunity to remove yourself from an  unsustainable mortgage obligation by selling or even short-selling the place. There are more people looking to become homeowners, meaning that you might not be as upside down as you were last year or the year before.

Second Mortgages

If you lost a home to foreclosure in a non-recourse state and you had a second mortgage or home equity line of credit, it’s entirely possible that your second is still a lingering debt.  Many second-mortgage holders are not actively collecting on these loans, but they simply stay on your credit reports and eventually rear their ugly heads when the time comes for you to try to qualify for a car or a mortgage.
Some recommend bankruptcy as a way of extinguishing these loans, but bankruptcy makes an impact on your credit which may defeat the purpose of filling. You can contact the servicer of your former home’s second mortgage to discuss a settlement.

Check your credit reports

The first foreclosures from the last real estate recession began happening around 2005-2006, so they are set to be timing off of credit reports right about now. If you had an early-recession foreclosure or short sale, check your credit reports now to ensure that they are being reported correctly, or not at all, if the seven-year expiration time frame has run. Even if your short sale or foreclosure was not that early, it may make sense to pull your credit reports and understand how things are being reported and the impact these items are having on your credit score. You might be surprised at what you find in your credit report.

Refinance and lock in low rates

If your home has had a decrease in value during the recession, it might have been nearly impossible to refinance and take advantage of lower rates to bring your payment down. With sales prices on the upswing and rates still low, though, you may have a new opportunity to refinance your loan and lock it in at a lower rate.

These are just a few of the methods that can be used by homeowners to have a fresh start. Selling your property, considering a second mortgage, evaluating your credit reports or refinancing to lower your loan percentage may be the new start you need to get back on your fee.

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