How To Avoid A Short Sale
A short sale happens when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
Many home buyers think there was no way they could stop their home from becoming a short sale. However, there are many steps to prevent this result.
First of all, buyers have to understand his loan fully, and what it requires to get into it and to manage it. A mortgage broker is only as reliable as the information given to him or her - wrong information can only bring about disaster!
Once into the loan, it is up to the buyer to make normal payments and to understand when the loan would adjust to the newer and higher rate. Generally, the home buyer has two years before this happens, more than ample time to change his lifestyle to being an owner of property, and this usually involves a sacrifice. Home buyers give up many dinners out and buying that shiny new car! Look at the cars in the driveways of the nicer homes on the block - most have older vehicles, not new ones. This is part of the sacrifice to owning a home.
Two years is available to learn how to manage finances and set up a liveable budget with careful analysis. It doesn’t take a Master’s degree to know you can only spend what you make and to remember that the government collects a part of it.
Six months before the loan readjusts to the higher rate is when the homeowner needs to evaluate if he can make it financially or not. If he cannot make it, he does NOT have to immediately sell his home, as there are a number of steps to take, contrary to popular belief.
If a senior, find out if your city/county has any special programs as far as programs that will hold penalties for non-payment of property taxes . California has many propositions to help out Seniors and Disabled. Over 62? Consider a reverse mortgage through an FHA lender.
How hard is it to rent out a spare room? Got too much junk? That junk is costing you the ability to receive rent from another person to share housing with you. It is doable. Fair Housing will allow you to discriminate against a different sex in the home so long as you are willing to share the kitchen and other areas, and not just rent the room. There are many on-line sources to do share housing, check with your church, even people where you work. Someone is always looking to save up by renting out a room and storing their furniture.
While you at it, start looking around for rental housing. It will be much easier to get into an apartment if you maintain a decent credit score. Many places will deny persons who have bankrupcy or foreclosure on their credit report. Don’t let this happen!
Consider taking an extra job to make a little more money as you wait for the sale to happen. You may only need this during the term of selling your home. You’ll get a better price for it, and it will salvage your credit since you’re avoiding a short sale.
Parents who have children still living at home, 16 years or older will benefit financially if their child can help pay their expenses, whether college or high school. There are many jobs available that young people can learn good skills such as paper routes and childcare. Teach your children not to be lazy, and that they will be rewarded by holding a job.
Cut back on spending and only buy the most critical items. Buy used or second-hand instead of brand new cars, furniture and even clothes. How badly do you need that cell phone? You can even do without cable TV if you buy up tapes and listen to the radio. The radio is still free!
Food prices are escalating, but many people save going to the huge discount stores. Don’t be shy about checking out the food banks in your area. They will fill your cupboards with peanut butter and tuna, dried goods, that will maintain nutritional standards and cut back on some expenses that will still allow you to buy the fresh fruits and veggies you pay with whatever earnings you have.
Medical care can generally be managed by going to the County Hospital. Here you may pay a small fee for visits, but prescriptions are free! Everyone knows that COBRA is expensive if you lose your job, and the biggest loss is not just the income, but medical benefits. You must be sure you are covered for any and all emergencies if they occur. Get registered, and know that during this stressful time, you have a source in case of medical needs with only paying a minimal amount.
Find a means to get exercise since it pays to be healthy at this challenging point. And nothing is cheaper than a walk around the block but beware of shopping for exercise or recreation - there are many vendors who want your buck! Discipline yourself not to pick up this or that that is only a dollar or two since it all adds up!
Hopefully the house you bought is near a bus or train route, good options if the car needs repairs or tires replaced. Its much cheaper than gasoline too.
There’s generally no reason for a short sale to happen if your smart. If you are already down to your last dime, then immediately list your property and get it sold. The longer you wait, the further behind you will become in house payments. Start listing early. You can be a renter again, recoup your loses, save your credit, and be a survivor.
