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12 Factors to Consider in Deciding Whether You Can Keep Your House

1. Why did you get behind in your mortgage?

Was it because of a temporary issue (sudden illness that you have recovered from) or some other short term financial emergency?

Or, was it because of a longer term issue like a job loss, divorce or permanent disability?

2. What is the current fair market value of your house?

Is your home worth what you owe on it?

Do you have equity in the home?

How long will it take before you have positive equity in your home?

Is the home a financial benefit or burden to you?

3. How much longer do you expect to stay in your house?

Are your kids getting older and ready to move on?

Does your current house meet your short term needs?

Does your current house meet your longer term needs – like retirement?

Do you even like your house? Is it time for a change?

4. Can you qualify for a loan modification?

If you qualify for a loan modification, can you keep up with a modified loan payment schedule?

5. Can you short sale the house? A short sale is where you sell the house for less than you owe on it.  You will, of course, need the lender’s permission to enter into a short sale of the property. Short sales are very time consuming and the success rate is low. If you want to consider a short sale, work with a competent attorney and real estate agent.

6. Will your lender consider accepting a deed in lieu of foreclosure and forgive any deficiency balance you may owe? In the current market, deeds in lieu are not real popular. The key to any deed in lieu is to make sure that the bank agrees to take it in complete satisfaction of any remaining indebtedness.

7. Where would you move if you had to? Check out craigslist.org and search your market for “rent to own” or “land contract” deals. In this market, you will be amazed at what deals are available if you spend a little time researching your market. You may find a house that you like better than the one you live in.

8. How long will it take you to move out of your house? Will you need to rent a storage unit – or is it time to declutter your life?

9. How long will it take your lender to evict you from your house? See my overview on the Michigan Foreclosure Process – from start to finish it can take your lender a year or more to get full rights to your property and be able to evict you.

10. No matter what your plan is – Respond to the 14 Day Notice of Foreclosure by your Lender’s Designated Agent and Schedule a Loan Modification Meeting.  Read your mail. Don’t miss this notice. If you respond within the 14 days, your lender cannot begin the foreclosure process for 90 days from the date of that notice. By making the call you buy yourself 90 days. At the meeting, you will have an opportunity to ask for a loan modification or some other deal. The big “IF” with the loan modification process is whether or not you can show the current income necessary to make the loan modification payment.

11. Respond to your Lender’s requests for Documents.  In order to see if you qualify for a loan modification, you will need to show your current income and expenses.  Your lender will ask you to produce a list of documents including your tax returns for the past few years and paycheck stubs.  Make sure to bring as many of these documents as possible to your meeting.  The lender has the right to decline a loan modification if you fail to bring the necessary documents to your face-to-face meeting.  Even if you do not want a loan modification, bring these documents with you so you can show good faith to the lender. Be prepared.

12. Go into your Face-to-Face Loan Modification Meeting with your Lender with a Game Plan.  Before you go to the loan modification meeting, you MUST have a clear idea of what you want to accomplish. Be realistic. Remember, you have to be able to show that you have the current ability to make the modified payment. Be realistic. Your lender is not going to forgive your principal debt.