Saving Your Credit In Foreclosure
Foreclosure isn’t a fun time for anyone. It can have a drastic affect on a person’s life and finances. The affects of foreclosure can last many years keeping you from being able to buy a house, car or even rent. So if you are unable to save your home from foreclosure, the next best thing is to save your credit. Although you will have to move out if you just want to save your credit, by saving your credit, it will allow you to move on sooner and start over with a new place to live.
You have a couple options when it comes to saving your credit, most have to do with selling your home. While this isn’t the most ideal situations you have to take into consideration the pros and cons compared to going through foreclosure. There are multiple ways to sell your house when facing foreclosure, including selling with an agent, offering your home as rent to own, doing a short sale and selling to an investor.
Selling your home with an agent can be a great option to get top dollar from your home if you start early. Selling with an agent typically takes 3-6 months, so it may not help if you wait until the last minute to sell. Also, when working with an agent, you have to pay the agents commission for the buyer’s agent and your agent, which can add up quickly.
Selling on Rent to Own Terms can be a great option to maximize the money you get out of your property. Since with a rent to own solution you aren’t getting completely cashed out of your property, it will typically only work if you aren’t behind by a lot. The way this would work, is your tenant buyer would put up a deposit, specifically it would be an option payment (they pay for the right to purchase in the future) this is the money that would be used to pay back your mortgage. Then, you would rent out the property and collect rent payments ideally above your monthly mortgage payment although sometimes it may be less. Having to come out of pocket a couple hundred dollars a month (if you can afford it) may be better than getting a foreclosure on your credit. Then the tenant rents the property for X number of years and buys your property at a later date. Typically you can get current market value by offering this strategy.
A Short Sale is another option, a short sale still has an impact on your credit just not as much as a foreclosure. In a short sale the bank agrees to allow you to sell your property for less than you owe and they’ll lose the difference. This is usually only the case when the property is worth less than the mortgage. At that point it’s not really beneficial for them to go through foreclosure. Since they won’t make the full amount back either way. Make sure you discuss this with your lender so you won’t have to pay the difference between the loan and sale price.
You can Sell to an investor for cash. There are investors that buy homes cash and can buy in just days. They can be a great option especially if you waited until the last minute. They don’t always offer the highest price if you want a cash offer but many of them can offer more if you’re willing to do something similar to the Rent To Own listed above.
