How Long Can I Stay in My House and Other Underwater Mortgage Questions Answered
When you first find out
you've got an underwater mortgage, anxiety is a natural response. After all,
you were counting on that house for your retirement, and suddenly you need to
look at how to get out from under it before you get bled dry!
But don't worry—the first thing you need is solid information, and we have that to give you! Kristin and I are Realtors and we've been through just what you're going through right now. So let us assure you, you can survive life after an underwater mortgage.
Here are some things you need to know:
Q. If I decide to foreclose on my mortgage or short sell my home, how long can I stay in my house?
A. In the old days, we would have told you roughly 6 months. But in the “old days”—four years ago—none of us were likely to be in this mess! Now, mortgage lenders are buried under a tidal wave of their own—a tidal wave of foreclosures and short sales.
That means that you may well have a lot longer than 6 months to live in your house for free. If you tack on a loan modification application and short sale, you could be looking a year to 18 months—or possibly more.
Q. If I foreclose or short sell, will my credit be ruined forever?
A. No! A foreclosure alone will certainly be a mark on your credit for about 7 years. A short sale may only ding your credit for 2 years, depending on the circumstances. But if you pay all of your other bills on time, that mark won't seem as dark to creditors. And let's face it —you're going to join literally millions of people in foreclosure or short selling their homes. With that many foreclosures and short sales going on, do any of us honestly believe that a foreclosure or short sale alone is the black mark it used to be?
You will want to get used to living within your means, and you'll probably want to pay cash for more purchases until you re-qualify for lower interest rates. But that's hardly a bad thing, is it?
Q. I'm afraid that our marriage is going to take a real hit in this process. How did you and Kristin manage the emotional issues of dealing with your underwater mortgage?
A. The first thing we did was keep our sense of humor—you'd be shocked at how much a good belly laugh helps! Well, actually, the first thing we did was re-commit to each other. And we made sure that we kept our lines of communication open. In an underwater mortgage situation, it's not spouse vs. spouse. It's the couple against the mortgage lender. That perspective makes all the difference!
Q. What are our chances of getting a loan modification, and what would that do for us?
A. Your chances of getting a mortgage modification are frightfully slim—so far, less than 3% of the people who have applied have been accepted! And for the most part, the modifications offered will end up meaning you'll have to pay a lot more for the mortgage, not less!
Q. What's a short sale?
A. A short sale is when your mortgage holder accepts a “short payment”—meaning the mortgage holder agrees to accept what your house can sell for as opposed to the amount of the mortgage. This is a tricky process, and you need to be on top of it every step of the way if you take this option to deal with your underwater mortgage! You need to hire a professional Realtor who specializes in short sales, as a lot of Realtors are not educated in negotiating a short sale with your lender. Don’t worry, we can help you weed through the mountains of Realtors and really find a good one who knows the ins and outs of a short sale. Not just anybody can accomplish a short sale. Feel free to contact us and we’ll help you with that.