Many homeowners with an underwater mortgage often find that getting more affordable rates through refinancing is a difficult task despite the fact that there are some programs like the Home Affordable Refinance Program that are in place to address issues such as this for those in a negative equity situation. However, there have been homeowners who are looking for either the opportunity to get a principal reduction or they want to short sell their home so that they can be free and clear of a requirement on the mortgage debt that is attached to a home whose value is much lower than what they owe.
Yet, there are also homeowners in a situation where their negative equity has been such a drain on their financial life that they need to participate in a short sale program to avoid defaulting or facing foreclosure, and in some of these cases homeowners are getting relocation assistance not only from federal programs but there are some state initiatives that can help homeowners who must relocate and find a new living arrangement after the loss of their home. Understandably, many homeowners would rather keep their property and simply find a more affordable option on their payment requirements for a set period of time until they can recover their financial footing, but in instances where this is not possible many banks are using short sales as a way to help homeowners avoid facing foreclosure and also avoid having another property sitting empty on their books.
Questions over whether a short sale is beneficial for a homeowner have arisen over the past months due to the fact that reports from earlier this year show a homeowner’s credit score could take a major hit when it comes to participating in one of these foreclosure alternatives initiatives. Yet, despite the fact that limited refinancing opportunities are available and some federal programs and state programs are in place to offer principal reductions, not all underwater homeowners are seeing benefits from these initiatives and feel that a short sale is their only option. Also, some homeowners believe that an agreement between a homeowner in their servicer to sell a property at a loss could potentially help avoid further complications after foreclosure has taken place, but homeowners need to be sure that there short sale will absolve them from a further financial commitment on their particular property.
Furthermore, homeowners do often see benefits from relocation assistance plans as of some servicers are paying homeowners quite well when it comes to participating in short sell agreements because they can help a bank when it comes to finding a solution on a distressed property, and homeowners who may see their credit score drop as a result of the short sale or factors leading up to their financial troubles will obviously be helped by these funds if a security deposit or moving costs may be difficult to pay for homeowners relocating after a short sale.
In the end, homeowners who are unsure of whether a short sale will be helpful are often urged to look at how it will impact their credit score, benefits that it may offer in light of their negative equity situation, and homeowners can also speak with representatives from their mortgage servicer or the Making Home Affordable Program to better explore programs to help keep their property or exactly what a short sale would bring for their particular situation.