Sometimes when you are facing foreclosure it is not possible or sensible to keep your home. That does not mean you should simply do nothing and let the foreclosure proceed.
Foreclosure destroys your credit and can result in a deficiency judgement, meaning that after losing your home you will still have to pay money. This happens when the foreclosure sale does not yield enough to cover what you owed.
There are alternatives to foreclosure that can minimize the damage to your credit and protect you from a deficiency judgement.
In a short sale you sell your home for less than you owe the bank. Now, there is a catch. You must get a waiver of deficiency or the bank can come back on you for the remainder of what you owe. Many lenders are willing to do it, though, to avoid the hassle and expense of the foreclosure process.
Deed-in-lieu of foreclosure can be a good option if you do not have equity in your home and you do not have a second mortgage or liens. Instead of going through the foreclosure process, you give the lender the deed to your home. This is not as bad for your credit as foreclosure. Again, you’ll need a waiver of deficiency. Banks do not always agree to this. It really depends on whether it is worth it to them to avoid the foreclosure process.
To learn more about alternatives to foreclosure, please browse this website and search our directory to find a foreclosure law firm in your area.