We live in a world where we’re constantly connected. We’re connected to our friends and family, we’re connected to our work and school, and we’re connected to the world of technology.
But it’s very easy to become disconnected from all of these things, and we tend to forget this fact.
It’s easy to live life on autopilot and forget about all of the people, places, and things we care about, and sometimes, we end up thinking “is there still good people in the world who care about what I’m going through.”
If you have reached this article then you are at a point that you are looking for answers.
You are looking for someone who can help you deal with the situation that you are in right now.
And I want you to know that right now is your time to believe. Believe in the possibility that things can turn around in your life.
But first, you have to deal with this house issue. And right now you might be asking yourself a question.
What happens if I walk away from my house?
If you are on this page then that means you are at that point of letting the house go.
And if you keep reading, we are going to explore some of the things you want to know if you are considering walking away from your home.
Reasons why someone would consider walking away from their home
There could be many reasons why a seller might want to walk away from their home.
One of the main reasons a seller needs to walk away from their home is due to a change of income.
If you are a homeowner and you have lost your job or you make less income but your mortgage payment amount or cost is extremely high.
It could cause you to experience a negative monthly cash flow.
In the Real Estate game, we call this feeding the alligator. This is when the debt that you are paying every month is higher than the income you bring in.
Sometimes it makes sense to feed into the alligator if you feel that you are only going to experience a short-term income loss.
If it has been longer than three months or even close to a year and you have been unsuccessful in catching up on your expenses then you are feeding into the alligator of debt.
Another reason why someone might consider walking away from a home is when they file for divorce.
After a divorce, many people are left with homes they cannot afford. They might think about walking away from the home and letting it go into foreclosure.
If you and your soon-to-be-ex are in disagreement over property division, you want to go by the judge’s decree. This way, you know how the court views the property.
This is important when you are trying to list the property with a Real Estate Agent.
A third reason that someone would consider walking away from their home is when the home needs a lot of repairs.
There are times when repairs might overwhelm the homeowner.
And when this happens the homeowner might want to just sell the house and start over with something different.
If for some reason you feel your home needs a lot of repairs and you don’t think it would sale, then it might surprise you that if the home is marketed to the right buyers the home will still sell.
What Happens To My Credit If I Walk Away From My Home?
Credit scores are used by lenders to determine the likelihood of you paying back a loan.
If you make an on-time payment on your home, your credit score will go up.
You can also improve your credit score by paying off debts and making sure that your credit card balances are low.
The higher your credit score, the more likely it is that you’ll get approved for more types of loans and at lower rates.
If you decide not to make your mortgage payments, you will likely end up with a damaged credit score.
If for some reason you are behind on payments and haven’t been able to catch up then remember that your credit is already considered bad.
So to start working to get the credit cleaned up you will have to think about clearing out the debt.
If you currently are behind on payments, I want you to know that there are some things you can do.
You must be willing to understand that even though your credit scores look bad, it will take some type to get the scores to come up.
The other solution would be to put the house on the market and work to pay off the bank.
If you pay off the mortgage debt, your scores will improve greatly because the mortgage debt is paid.
Your mortgage company could foreclose on you if you stop making payments
People must be aware of the contractual obligations that they take on when they sign up for a mortgage.
Often these obligations include having to make monthly payments until the end of the mortgage term.
If you stop making your payments, it could put you at risk for foreclosure.
Some protection is available if there are extenuating circumstances. For example, if you are in the military and deployed overseas or if you’ve been laid off from your job due to economic recession.
You must know what your options are before notifying your lender about any changes to your payment schedule.
If for some reason you decide that you still what to walk away from your home. The mortgage company will start to send default notices.
This starts when you are two or more payments behind.
Some states might start the process if you miss less than one or two payments.
You might be sued for any remaining balance of your loan after foreclosure.
Foreclosure is one of the most difficult financial events that can happen to a person. It can cause feelings of despair, anger, and hopelessness.
If you’re facing foreclosure on your home, there’s a chance that you could be sued for any outstanding balance.
This could happen if, for some reason, the deficiency is not fully recovered at auction or in the bankruptcy proceeding.
Your mortgage company could foreclose on you if you stop making payments
People must be aware of the contractual obligations that they take on when they sign up for a mortgage.
Often these obligations include having to make monthly payments until the end of the mortgage term.
If you stop making your payments, it could put you at risk for foreclosure.
Some protection is available if there are extenuating circumstances. For example, if you are in the military and deployed overseas or if you’ve been laid off from your job due to economic recession.
You must know what your options are before notifying your lender about any changes to your payment schedule.
If for some reason you decide that you still what to walk away from your home, then keep in mind that typically default notices will go out after you have missed three or more payments
Some states might start the process if you miss less than one or two payments.
You might be sued for any remaining balance of your loan after the foreclosure process.
Foreclosure is one of the most difficult financial events that can happen to a person. It can cause feelings of despair, anger, and hopelessness.
If you’re facing foreclosure on your home, there’s a chance that you could be sued for any outstanding balance.
This could happen if, for some reason, the deficiency is not fully recovered at auction or in the bankruptcy proceeding.
What is Foreclosure and How Does it Affect My Credit?
Foreclosure is when a bank or lender takes back the property from the homeowner. Foreclosure is a legal process that’s available to lenders when they’re unable to collect on their mortgage after trying other options.
Foreclosure can affect your credit score in different ways and it can lead to additional issues.
When you go through foreclosure, you’ll typically have some type of blemish on your credit report for seven years.
Foreclosure can be a very stressful experience.
In addition to the mental and physical stress, it can cause, one an individual and their family.
Walking away from your home can be a hard decision.
But, if you are having issues with your mortgage payment and if you are unable to catch up then the foreclosure process may start.
How Do You Know When The Foreclosure Process Is Started
The foreclosing process can be started by the bank.
It may start when you are notified that your house is being foreclosed.
They will send you a notice of default or notice of intent to foreclose.
The foreclosure process can also start when the property taxes are not paid.
So if for some reason you find yourself behind on your taxes then you want to be careful because property tax foreclosures do happen when you are months behind on paying them.
A foreclosure process can also begin when you have stopped making payments on your mortgage for 6 months in a row or more than 2 payments are past due for more than 90 days each.
Each state is different about how the proceeding gets started.
But typically you will start to receive a Notice of Default in the mail.
When you start to see the Notice of Default it means the servicing company has started the foreclosure process.
4 Ways To Avoid Foreclosure
There are possibly four ways you can avoid foreclosure. We are going to go over these four ways.
And this will help you to determine what you want to do to see if we can help you to void just walking away from your home.
Doing a loan modification
What is a loan modification? A loan modification is a type of loan restructuring.
The modification is the result of negotiations between the borrower and lender, often in response to hardship on the part of the borrower.
A loan modification is a change in the terms of a loan that provides relief from financial hardship experienced by the borrower.
To qualify for a loan modification, borrowers must show they are experiencing financial hardship.
This can be demonstrated by showing an inability to make scheduled payments on their loans, having missed two or more payments, and/or submitting documentation of their income and expenses.
A loan modification can entail any of the following changes to the original terms of the contract: changing the term length of the agreement, changing repayment plans by extending or reducing terms, lowering interest rates or providing forbearance periods, extending home equity lines of credit (HELOCs) without requiring additional collateral deposits.
Typically the lender might want you to make an extra payment to show good faith that you will abide by the agreement.
Doing a Short Sale
What is a Short Sale? A short sale is when a property is sold for less than it is worth.
This happens when the home’s market value has gone down below the mortgage balance, but the homeowner can’t afford to bring their payments up to date.
The process of completing a short sale can be long and arduous, but there are lots of steps that homeowners need to take to qualify for this type of transaction.
If for some reason your home values are less than what you owed then we can work on doing a short sale.
When you do the short sale do keep in mind that the bank will take mostly less than what you owed and they will typically consider the amount paid in full.
Your credit will still be bad but you will typically be able to get back in a home within a shorter period than a foreclosure typically within 3 years.
Doing a Chapter 13 Bankruptcy
What is Chapter 13 Bankruptcy? Chapter 13 Bankruptcy is a debt relief process that allows individuals to put together a plan for repaying certain debts.
Chapter 13 Bankruptcy offers some advantages over other types of bankruptcy, such as Chapter 7.
Because Chapter 13 requires repayment of debts and monthly payments and completion in 3-5 years, it may help keep the debtor’s property in their possession and give them time to rebuild their credit.
The disadvantage of doing a Chapter 13 is when you miss a payment or for some reason, you can’t make a payment then you will find yourself in default of your Chapter 13 and then the foreclosure process will start up again.
So make sure you will be able to make all your monthly payments in the Bankruptcy.
Doing a Deed In Lieu Deed
What is a Deed In Lieu? A Deed in Lieu is a legal instrument that can be used by people who owe money to a lender but are unable to pay the debt.
A Deed in Lieu is a document that is signed when one individual or entity relinquishes their rights to a mortgage company.
If you have come to this solution of doing a deed in lieu because you want to walk away from the property, then I would suggest trying and selling the home outright if the market is hot or doing a short sale.
Why It Would Be In Your Best Interest To Try And List The Property For Sale
So this leads us to this question that I want to ask you.
Why not just list your home for sale? If you are at a point that you want to walk away from your home.
Then one of the best decisions you could make is hiring a Realtor to list your property for sale.
If you are in a hot market and you can not do a short sale on the home.
Then the next best thing would be to list the property for sale.
What this will do is help you to clear out the mortgage debt or back taxes owed.
This benefits you in 2 ways.
1. You will be able to finally be at peace because you are no longer worried about having to make the mortgage payments.
This helps to take away the pain of dealing with the phone calls every single week.
That is what the goal is right? To be able to sleep and night and not worry about how your going to pay the next mortgage payment.
Although your credit scores will be bad and the credit points will go down. You will have the mortgage paid in full.
2. This helps because it will show on your credit report that the amount is paid.
It helps you because you don’t have to wait 7 years to begin the buying process.
You will be able to recover a lot faster because the debt service is paid off and you can work your credit out in a short time frame.
Conclusion
If you’re curious about what could happen to your house if you walk away, hopefully, this article answered some of your questions.
It’s important to think carefully before making any decisions that could affect your credit score.
You now know that there are many different things to consider before making the final decision to do it.
Hopefully, this knowledge will help you to make a solid decision on what you truly want to do.
If you need my help selling your home, I’m one phone call away.