Thanks to an economic downturn, many people are finding that their homes are worth significantly less than what they owe. At the end of 2009, 11.3 million homes had negative equity, representing about 24 percent of mortgages in the U.S. Another 2.8 million homeowners have less than 5 percent equity; meaning 28 percent of mortgages are in serious trouble. The Obama administration has developed some programs to help homeowners with underwater mortgages avoid foreclosure.
If You Can Afford the Home
If you are still able to make the monthly mortgage payments, you can stay in the home and choose to ride out this economic downturn. Given time, home values are very likely to rise. You might also choose to rent out the home, even though you may be covering the difference between rental income and the mortgage payment.
If You Cannot Afford the Home
First, you should talk to your lender about a loan modification. Talk to your lender as soon as possible, and be aware that if you don't follow the provisions of the agreement the modification will be void. If you have an FHA loan, there are HUD guidelines to help you. If that is not possible, you may wish to consult an attorney regarding Chapter 13 bankruptcy, which will allow you to stay in your home and make up missed payments over a period of 60 months. If you don't qualify for other remedies, you can discuss a short sale with your lender, where the lender agrees to take less than the home is worth. Still, the lender may still be able to seek legal recourse for the loss after the short sale is complete.
Government programs include refinancing for underwater mortgages, loan modifications and a foreclosure alternative program to help those facing a short sale or deed-in-lieu of foreclosure. The requirements vary by program. Depending on where you live, there may be additional state and local initiatives to help you. To find out what government programs you may qualify for, call 888-995-HOPE as soon as possible to speak with a HUD certified housing counselor.
What Not To Do
Be aware that scammers are looking to take advantage of struggling homeowners. Do not pay a fee to anyone who tells you they can get your home loan modified for you. Help from HUD approved housing counselors is always free. Never send a mortgage payment to anyone other than your lender, unless your lender tells you otherwise. Be very wary of anyone who demands you sign papers you don't understand or asks you to sign over your deed.
Kathryn Keep is an eco consultant and full time mother. She is a graduate student studying ecology. Her favorite topics are environmental issues, alternative health, home decorating, green building and general sustainable living.