Four things you should never do if you fall behind on your mortgage!
Absolutely Do Not ever deed your property to a third party without absolute confirmation your loan has been paid off.
Note: if you believe this option is best for you, please consult with an attorney – not the buyer’s attorney – before completing the transaction.
If you deed your property to a third party, that party then controls the property. The new owner can rent the property (and keep the rent), attempt to sell the property to make a profit, move into the property or use the property in other ways.
What the new owner might not do is make mortgage payments, and that could become a big problem for you.
Just because you no longer own the property does not mean you are no longer responsible for the mortgage loan obligations. The lender made the loan to you. And until it is paid off you will be primarily responsible for the mortgage obligation.
If you give up control of the property and the new owner does not pay on the loan, the damage to your credit could be catastrophic.
Number Two: Do Not sell your home at a huge discount.
Unless the actual foreclosure sale is less than 45 days away, you have time to explore options. Take a day or two and make a few phone calls. As a general rule, if someone is pushing you hard to get you to sell your property to them, it’s probably because the deal they are proposing is very favorable – to them.
If you have equity in your home, it belongs to you. Let’s see if we can get it to you.
Number Three: Do Not authorize a prospective buyer to deal directly with your lender.
The buyer has one goal and one goal only, and that is to negotiate a low, probably very low, price with your lender. The buyer will ask your lender to accept a discounted payoff. The negotiations could go on over an extended period of time, and if the transaction does not work out the buyer may elect not to buy your property. It could leave you with very little time to resolve the situation and avoid foreclosure. Further, you have no control over the information that goes to your lender or the accuracy thereof. It is entirely possible that the buyer could handle the negotiation and presentation of information in a way that makes it very difficult for you to resolve your loan situation later.
Number Four: Do Not do nothing.
A surprising number of people just accept what they see as the inevitable, and let foreclosure run its course. Don’t let it happen – the damage to your credit will follow you for years. Short Sales really do SAVE CREDIT! Here is a report on “How short sale vs foreclosure affects your credit”.
Take a little time to explore potential options. You do not want a foreclosure on your credit record. It will hamper your ability to get a consumer loan or a car loan for at least a few years, and it will be very difficult to get another mortgage for a very long time.