The options that should not be explored are the ones offered by shysters who are allegedly helping people remain in their homes and “solving” their mortgage problems. This state of the union has bred many opportunists who are simply taking advantage of distressed homeowners only to fill their own pockets. Again, there is no magic bullet.

As far as options, the differences between foreclosures and short sales are probably pretty clear to most at this point. Contact us if you need guidance in those areas.

Some of the other alternatives for distressed homeowners include:

• Refinance
  • If you are current with your mortgage payments you may be eligible to capitalize on the current interest rates.
• Lender Workout
  • You don’t know until you ask…some lenders are making things work by forgiving back payments, adjusting interest rates, and even recasting existing loans.
• Sell and Bring Cash to Closing
  • You can avoid foreclosure by making up the difference to the bank if you sell your home for less than it is worth, but still make good on the debt. Some homeowners are reaching into IRAs and the like to liquidate assets for this purpose.
• Deed in Lieu of Foreclosure
  • This is not a viable option in all markets, but you may be able to literally trade in your home in exchange for the cancellation of the debt. In this scenario be certain to ask the bank to release the deficiency so you are free and clear.

Each of these options may have potential issues and may carry eligibility restrictions. Your first steps are to take full stock of your situation and then contact both an experienced distressed property Realtor and your lender. The thing not to do is wait…if you are a homeowner in trouble; time is not going to cure what ails you.

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.

If I can answer any questions you may have about how these changes could impact you, call me at 727-488-9747. We always enjoy helping our clients!

Search for all the Foreclosure properties in Tampa Bay.