Are you thinking “Can I sell my home if I am behind on my mortgage?” here is the answer.
Financial instability is a hazard most people need to confront at some point in their lives. When circumstances put you in the unenviable position of being behind on your mortgage, what can you do?
Is it possible to sell your house if you are behind? Are there any other ways back into solvency? If you are proactive and pay close attention to the details, you can get out of the situation with your credit intact and avoid the stress of foreclosure.
Can I Sell My House if I’m Behind on My Mortgage?
It is possible to sell your home if you are behind on your mortgage; however, time is of the essence. Depending on how far behind you are, it will be more difficult and less financially advantageous the longer you wait. Your options are largely dictated by how much you owe, and how much your home is worth.
Above Water
If you’re wondering what happens if you sell your house and still owe money, the answer may be “nothing.” If the value of your home is greater than the amount you owe, then you are “above water.”
At this stage, you can simply sell your home and use the proceeds to pay off your mortgage. Doing so would not damage your credit, nor would it preclude you from getting another mortgage for another house.
Understand, however, that selling a home takes time, and the longer you wait or the longer the process takes, the more you will owe – so be proactive.
If you can predict with reasonable certainty that your finances are not likely to improve, start to consider selling quickly after you first fall behind on your payments.
Under Water
Being “under water” on your mortgage can be devastating. It’s when the fair market value of your home is less than what you owe, meaning that when you sell you will still not have enough money to pay off your mortgage debt.
This is when people might start to ask, “Can I sell my house to avoid foreclosure?” If you are under water on your mortgage, you could decide to initiate a short sale and ask for the remaining principal on your mortgage to be forgiven, thereby avoiding foreclosure. For this, you need to convince your lender to get on board.
For a short sale, you will need to get hire an agent to sell your home and put together a proposal to your lender explaining that you want them to forgive the difference between what you owe and the proceeds of the upcoming sale.
You will also need to provide proof that you cannot continue to make payments. Your lender can accept or reject the proposal or send some demands of their own.
A short sale is never ideal, as it can damage your credit severely; however, it is much easier to recover from than a foreclosure. Furthermore, you will be able to remain in your home up until the sale, whereas a foreclosure would require you to leave.
Some lenders prefer short sales to foreclosures since a short sale does not require them to spend time and resources dealing with the property.
Are There Any Alternatives to Selling My Home?
Some lenders are receptive to the idea of a mortgage forbearance, wherein they allow an extended grace period for you to repair your finances. Although the deferred payments will be added onto the principal, a mortgage forbearance can work well if you think your financial troubles are temporary.
They have the added benefit of not damaging your credit, too. After several months, your payments will resume and the amount you missed will be factored into your new payments.
Loan modifications are also an option if you have trouble making your payments. All lenders want to make good on their investments, so it is in their interest to meet you partway by offering lower payments over a longer repayment period or other such compromises.
This option may do some short-term damage to your credit, but meeting the new, lower payments would repair this in time.
Conclusion
As discussed in this article, if you’re behind on your mortgage and want to sell your home, you have options. But time is of the essence. Weigh the choices and make the best decision for where you’re at. Consulting with a real estate professional can help when deciding whether or not to sell your house when behind on your mortgage.