It can happen to anyone.... job change, divorce, medical emergency. Anything that makes it difficult to pay your mortgage. That mortgage - the one thing that's sheltering you and your family. You don't want to lose your house but you just can't make ends meet any longer. The problem is, you can't just sell the house. You may owe more than the home is currently worth. But you also don't want to just walk away and have a foreclosure tainting your credit history for up to 10 years!
What can you do?
There are options.
Surprisingly, quite a few. The short sale is just one of those options. Arizona is a title theory state, which means that your property remains in trust until the loan is paid off. The legal title is held by the lender and the borrower or homeowner has equitable title, which means the right to possession and use of the property. It's important to know this because how title is held determines a foreclosure process.
If you simply stop paying on your mortgage, the foreclosure process begins. It is governed by the Power of Sale clause in your loan documents. This gives the lender the right to sell your property if you stop paying on the mortgage. This is considered a "nonjudicial foreclosure", which simply means that the entire process can happen outside of the court system. Most foreclosures in Arizona are nonjudicial.
However, a foreclosure only happens if there is no communication or steps are not taken by the homeowner to rectify the situation, modify the loan, refinance or short sale the property.
Options include a refinance. You can talk to your lender about the option of refinancing your existing loan. If this is a viable option for you you can basically skip at least one month payment if not to depending on time limits and time frames. However, if your credit is already sliding, it may not be the best option as far as a payment.
Another option could be a modification of your existing loan. You'll want to speak to a real estate attorney or housing counselor on options for modifications. Modifications could include giving you a break for a month or two as long as you catch up within a certain timeframe what you owe. It also could be a temporary modification, lowering your monthly payment for a certain time in order for you to get back on your feet.
If you're planning on moving, a short sale is really the best option but you have to contact your lender and a short sale agent immediately. Time is crucial during this short sale process and you need to get the short sale approved by your lender in order to proceed. This means that you'll need to prove to the lender you need to sell the house based on some financial hardship. The most common hardships are a death in the family, divorce or some major familial change, medical complications, job loss or major job change. You'll need to write a letter to the lenders stating why you need to short sale the home.
You'll also want to get in touch with a short sale real estate agent. This is someone who is proficient in short sales and has the dedication and communication to get things done in a proper fashion and within time frames that are crucial to process. Lenders will need certain documents and the longer homeowners or borrowers draw this process out, the more likely they are to slip into foreclosure. It is crucial to get the most accurate and up-to-date documents to your real estate agent and/or your lender in a timely fashion.
Related: Boomerang Buyers After Foreclosures
More often than not short sales are approved but it takes determination and the perseverance from homeowners and their real estate agents in order to get the process completed. Lenders usually expect borrowers to miss a payment or two but this is not necessary in many cases.
Again, speak to a real estate attorney, your lender or one of our short sale agents today about your options and how to get started getting back on track.