Quote From: longkarenWe are in a situation similar to the first guests on today's show. The real questions I had were not answered, just kind of glossed over. Here's my question: when people are in a situation where they are in a house they can no longer afford, bill collectors are calling, and everything seems to be falling apart, the obvious answer is to get out of that house and rent, buy a trailer, or do whatever you need to do. We are very willing to do this. The expert on today's show mentioned the problem, but offered no real solution. When your credit is way down in the pits, you will not qualify to buy anything smaller or even rent. When getting a co-signer is just not an option (not everyone is in their 20's or 30's with parents able to help), are there any solutions to this problem? It's kind of like you stay in the house you can't afford, because at least you have a roof over your head. It would be great if on a future show Dr. Phil could address this, and give some real steps people could take to overcome this problem.
If you can no longer afford your house with your current income, you have some options. If your income is down only temporarily, you can pursue a loan workout or reinstatement with your lender.
If your income is down permanently, or is not expected to go back up, you can contact your lender to find out if a loan modification can bring your payments down to something you can actually pay. They will ask you to submit some sort of hardship application and documentation - i.e. a hardship letter, proof of income, recent tax returns, etc.
When a workout / loan modification won't work for you, or if the lender will not do it, you can look at selling the property. Many people now owe more than the home is worth. In this case, you would be looking at a short sale. In a short sale, the bank has to agree to accept less than what is owed on the house. The benefit here is that both the lender and the homeowner avoid a costly foreclosure.
Another option is Deed-In-Lieu of Foreclosure. In this scenario you simply give the property back to the lender, avoiding a foreclosure. Most banks will want you to have tried or applied for a workout / loan modification, and/or a short sale before resorting to a Deed-In-Lieu.
To recap, if you simply can not afford the home anymore, and a loan modification does not make it affordable enough for you, you really need to accept the fact that you will likely need to move on. Even if you have a low FICO score, you CAN get a rental.
Having gone through a foreclosure ourselves, our credit was naturally very bad. We were able to find multiple places to rent - you just have to work a little harder and contact more properties before you find one that will take you. You might find that offering a higher security deposit will help the landlord overcome any reservations they have about your credit score. Also - many people are going through this now, so they are seeing more and more applicants with credit problems. A year or two ago, it would be harder to get a rental than it is now with poor credit.
Dr. Phil makes a mention of making a decisions without letting your emotions getting in the way. You may be attached to your house or the memories you had there - but you need to think about what is best for you financially and in the long term. The sooner you can get this situation behind you, the sooner you can begin to move forward again.
I wish you the best,
Mike Bertrand
Moving Forward
