<< Short Sales Part 1   |   Short Sales Part 3 >>

OPTION #1 - BRINGING THE LOAN CURRENT.

Most homeowners don't have the means to bring the loan current. Out of desperation they look for alternatives to foreclosure or short sales. They want to remain in the home. They dive head first into untamed infested waters carrying a raw, bloody piece of meat on their back and hope that sharks won't attack. But they do. Here are a few standard scenario's as to how a homeowner might incorrectly try to bring their loan current.

BORROWING THE MONEY

An investor will loan you the money to bring your loan current, often at an outrageous interest rate. If you couldn't afford your mortgage payment in the first place, what makes you think you could afford that same payment plus a second payment to another party? You can't. Therefore you will default with them, and their contract will allow them to take over your position on your mortgage. They just ended up with your home and your equity, and you have to move out. Your cost? The loan fees you paid them just to ultimately end up in the same situation as you would have anyway.

RENTING YOUR OWN HOME

Another course of action a homeowner might take to bring their loan current is to sell the home to someone and rent it back with the hopes of one day being able to re-purcashe the home. An investor will offer to buy the home from you. You will be allowed to rent from them and even build in a re-purcahse agreement if you want. Of course your new rent payment is going to be higher than your mortgage payment which you couldn't afford in the first place. You will default. They will evict you, cancel your future purchase and sell the home for a nice profit taking all of your equity and putting it into their pocket. Your cost? Your higher than necessary payment and any equity which you might have hoped to get out of the home. All that to end up in the same situation anyway.

REFINANCING

Many homeowners think "Oh, we'll just refinance" once they get a notice of default. However, once the NOD is recorded on your credit, you will NOT be able to get a mortgage loan for at least 3 years. End of discussion. Game over. The End.

However, there will be plenty of mortgage loan officers promising to have a special solution just for people like you. All you have to do is apply. The application fee? Starting at $500 or even more...non-refundable. Why so high? Why non-refundable? Well, a credit report costs $20 and once they see a NOD on your credit, they know they can't help you. So they take their time getting back to you just to tell you that it looks like it can't work out in the end. They keep your steep application fee. They are out $20 and 20 minutes. You are out a large sum of money that would have been better spent as a rent deposit or paying another bill.

Honestly, the unscrupulous loan officer knew when you told them your situation that you weren't going to get approved by a lender. But they wanted your application fee. They wanted you to "apply" so they could "officially" tell you "declined".  Oh, and if a loan officer does magically come up with a "lender", it's probably a "hard-money" lender. Which means a much higher interest rate than you had originally, payable over a much shorter time than you had originally. That means a higher monthly payment. And let's face it, you couldn't afford your current payment, so how is a higher payment going to help you?

THE SOLUTION TO BRINGING THE LOAN CURRENT?

All of the approaches above will result in the same thing. You end up having to list your home for sale and moving out. Whether it is immediately or over several months after lots of valuable money lost is up to you. The only way to bring your loan current is to figure out first how to keep your loan from getting behind again and having a game plan to keep that from happening. Then you must get the money from a source that is not going to require repayment anytime soon. This includes a salary bonus, or a withdrawal from a 401K, savings account, investment account, or other retirement account. Without those resources, Option #1 isn't going to fan out well. Sorry.

<< Short Sales Part 1   |   Short Sales Part 3 >>