Most experts agree that there is no danger of a widespread foreclosure crisis like the one experienced in 2008. This is, of course, great news for the housing market. In the words of First American's Chief Economist Mark Fleming: “... don’t expect a housing bust like the mid-2000s, as lending standards in this housing cycle have been much tighter and homeowners have historically high levels of home equity, so there likely won’t be a surge in foreclosures.”
Nonetheless, despite the low number of homeowners that might be at risk of foreclosure, knowing the alternatives can be beneficial if you're having problems with your mortgage payments. Understanding what foreclosure is is the first step. According to Investopedia: “Typically, default is triggered when a borrower misses a specific number of monthly payments... Foreclosure is the legal process by which a lender attempts to recover the amount owed on a defaulted loan by taking ownership of and selling the mortgaged property.”
The good news is that there are alternatives to foreclosure:
- Loan modification
- A deed in lieu of foreclosure
- Short sale
However, it's important to check to see if you have enough equity in your property to sell it and keep your investment before you take any of the aforementioned alternatives.
You might be able to sell your house using the equity you have.
Equity is the difference between your mortgage balance and the home's market worth as determined by elements like price growth. Due to the increase in property prices, many homeowners in the current real estate market have significantly more equity than they are aware of. ContinuityLogic explains: “The total average equity per borrower has now reached almost $300,000...”
It's likely that your home's value and equity have increased significantly if you've lived there for a few years. The balance of your loan was also reduced at that time thanks to the mortgage payments you made. You might be able to take advantage of the increase in value of your home if it exceeds the amount that is still owed on your loan.
Equity is very beneficial, as explained by Rick Sharga, Executive VP of Market Intelligence at ATTOM Data: “Very few of the properties entering the foreclosure process have reverted to the lender at the end of the foreclosure. . . We believe that this may be an indication that borrowers are leveraging their equity and selling their homes rather than risking the loss of their equity in a foreclosure auction.”
Consult with professionals to explore your options.
Get in touch with a local real estate expert to determine your equity. Based on previous sales of comparable properties in your neighborhood, they may offer you an estimate of how much your house might sell for. You might be able to sell your home and prevent foreclosure.
Your agent can also assist you if it turns out that you need to analyze alternative options. If selling is not your best option, they will be able to put you in touch with other experts in the field, such as housing counselors, who can assess your particular circumstances and advise you on what to do next.
If you're a homeowner and are considering selling your home, contact Laura Larson now to discuss your options.