Foreclosure is a scary prospect for homeowners in New Jersey who can no longer afford their mortgage payments. However, there are alternatives that can help mitigate the damage. Realtor.com explains what you can do if your home is at risk.
If you can prove financial hardship, a short sale might be the right option for you. This involves selling your home for less than what’s left on the mortgage, which requires the lender’s approval. If so, the home will be sold, and any remaining debt will be discharged. Short sales take a bit longer than a standard home sale and you’ll need to work with a broker with knowledge of the short sale process. To qualify for a short sale, you’ll need to provide documentation establishing financial hardship.
Deed in lieu of foreclosure
You can also surrender the home to the lender via deed in lieu of foreclosure. Depending on the value of the home, the lender may agree to forgive remaining debt to avoid a protracted foreclosure process. However, the lender may request that you repay a portion of the loan if you still owe quite a bit of money compared to the value of the home. Along with establishing financial hardship, you’ll also need to attempt to sell the home for at lease 90 days.
If you’re still making mortgage payments but anticipate future issues, the best solution is to sell your home in a standard sale. This prevents your credit from being negatively affected by foreclosure, although you’ll still end up losing your home. You also may need to decrease your asking price to ensure a sale, which means you’ll still be responsible for the remaining mortgage payments. Another option is renting the home, which would provide a steady income that could be used for mortgage payments. However, you would need to secure alternative housing in this case.