Consider all Options

A short sale is one of many ways to deal with your problem. Here is a review of other alternatives to a short sale. However, the reason short sales are so often the best alternative, and are such a large part or the resale market, is that these alternatives are often difficult or impractical.

None of these solutions deal effectively with the fact that a short sale is necessary because the value of your home is less than what you paid!  In theory, one option in the loan modification option below is to reduce the amount you owe (called a Principal Reduction). Almost everyone considering a short sale would stay in their home if this were possible. However, lenders can't really do this, unless they own the loan, or the investor that bought the loan is willing to do so. This is very rare.

Loan Modification

Your lender may agree to change the terms of the loan to make the payments more affordable. For example, missed payments may be added to the loan balance, the amount you owe may be reduced (the principal),the interest rate may be reduced, or the loan term may be extended in order to reduce the monthly payment. 

The federal government has encouraged lenders to modify loans with its Making Home Affordable program to help an estimated four million homeowners modify the terms of their loan. If lenders take part in this program, they get a whopping $1,000!  However, as of April 2010 only about 300,000 homeowners have received permanent loan modifications under this program. Take a look at the offer and many conditions at www.MakingHomesAffordable.gov.

Loan Re-Instatement

After a lender starts a foreclosure process, the lender may agree not to foreclose if you pay the total amount owed by a specific date.

Refinance

If your lender will not agree to a loan modification, you may be able to refinance with another lender. This is especially helpful to you if your loan has, or will, reset to a much higher interest rate. But it won't work if your home's value is much less than your current loan amount, unless you want to contribute cash.

The federal government's HOPE for Homeowners program will refinance mortgages for homeowners that can afford a new loan insured by the Federal Housing Administration (FHA). If this option sounds right for you, take a look at www.hud.gov/hopeforhomeowners/index.cfm.

The federal government also encourages lenders to refinance up to 125% of fair market value through the Home Affordable Refinance Program (HARP).

Forbearance

Your lender may agree to reduce or suspend your mortgage payments for a short period of time. The lender will probably want to add missed payments to the loan balance.

Repayment Plan

An agreement by the lender to resume making monthly payments with a portion of the past due payments added on each month until they are caught up.

Deed-in-Lieu of Foreclosure

Your lender may allow you to "give back" the property. This is commonly referred to as "sending them the keys". However, this must be agreed to by the lender, and this option may not be available if there are other liens recorded against the property. This option will damage your credit like a foreclosure. But it will save your lender a lot of money by not having to foreclose on the mortgage. For FHA mortgages, review more information at www.hud.gov/offices/hsg/sfh/nsc/rep/dilfact.pdf. 

Work-Out Sale

The lender may allow a specific amount of time for you to sell the home and the loan to be paid off, without making monthly payments. The lender may also allow a buyer to assume the loan to purchase the property even if the loan is non-assumable. However, this is rarely helpful if you owe more on the loan than your home is worth.

Bankruptcy

If you are considering bankruptcy as an option, consult with an attorney that specializes in bankruptcy cases. This will severely damage your credit. In a Chapter 7 bankruptcy, you can erase your debts, but can only keep limited possessions, such as a car valued at up to $5,000. In a Chapter 13 bankruptcy, you can reorganize your debts and pay them off over three to five years. For a review of Arizona bankruptcy options, try www.research.lawyers.com/Arizona/Bankruptcy-in-Arizona.html.

Foreclosure

Allowing the lender to foreclose on your home is another option. This will severely damage your credit. Many people allow this to happen instead of successfully completing a short sale and protecting their credit.

Ask your attorney about the possibility of a deficiency lawsuit after foreclosure. Arizona anti-deficiency statutes will protect you if the loans were original loans to purchase the property, if it was your primary residence, and if the lot size is 2.5 acres or less. If the property is a rental, or any loan was obtained after you purchased the home, the lender can come after you after foreclosure, or sell the debt to a collection agency.

In a short sale however, Arizona Short Sale Doctor negotiates with the lender(s) to agree to accept the sale price as full payment of the mortgage. Learn how.