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What to Do If You're Upside Down on Your Home

What to Do If You’re Upside Down on Your Home

If your homes value is lower, than the amount you owe on your loan it means you’re in a situation known as equity. Here’s a simple guide for those facing this scenario.

Evaluate Your Homes Value

Start by assessing whether your homes value is likely to bounce.

There are two aspects to consider when estimating the value;

1. Determine the value of your home itself. Begin with an automated estimate. Then seek input from a real estate agent for a more accurate assessment.
2. Estimate the area value by inputting your city name. This will provide you with insights, into prices, rental rates, market trends and neighborhood-specific data.

By completing these steps you can gauge the chances of your homes value increasing to surpass what you owe on the loan within a timeframe. If there is a chance of this happening staying put might be an option especially if it aligns with your familys work and school locations.

Exploring Home Affordability OptionsIf you find out that it will take a time for your finances to recover your next move should be to get in touch with Making Home Affordable (MHA) which’s the U.S. Governments program designed to assist homeowners who are upside down, on their mortgages. You can reach out to MHA online. Call them at 888 995 HOPE to explore your options. Starting with this government resource is the way to steer clear of scams that target homeowners facing financial difficulties.

Homeownership Choices

Collaborating with MHA (or a housing counseling agency approved by the government that they recommend) will provide you with these options;

  • sale as an alternative to foreclosure; When you owe more on your home than its worth and need to sell its known as a sale. A short sale requires approval from your lender since they will receive less than the amount owed at closing. Our guide on sales explains the process for both sellers and buyers.
  • Loan modification, for maintaining ownership & reducing expenses; A loan modification involves your lender assessing your hardship and potentially agreeing to lower the loan balance, interest rate, monthly payments or a combination of these adjustments.
  • When requesting a loan modification the process is similar, to when you applied for your mortgage. However you will need to provide explanations and documentation regarding why you are unable to afford your payments.

One potential strategy to consider is renting out your home in order to maintain it and potentially cover some expenses. If you plan on keeping your home until its value increases again and can find an rental property in the meantime renting out your current home could help offset some costs. It’s advisable to research rates, in both your area and a new potential location to determine if this option would work for you.

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