Affordable Mortgage Payments After Divorce
by Leonor B. from Mesa, Arizona
Ask Kate how to get affordable mortgage payments after divorce: Leonor asks me what to do about her home. After a divorce, she is the sole support of three children, pays college tuition, and is saddled with debt from her failed marriage. Should she stay and try to work out affordable mortgage payments and terms with the bank or opt for a short sale? Are there other options?
Affordable Mortgage Payments: Keep My Home vs Short Sale By Leonor B. from Mesa, Arizona
I'm finalizing a divorce of 20 years while supporting 2 college kids and a 9 year old on a single income. I have no help from my ex-spouse.
We filed a chapter 13 bankruptcy in 2011 but it was dismissed after the dissolution of our marriage in 2013.
My arrears are over $90 thousand due to my ex-husband not making the mortgage payments. So now my credit is really bad due to mortgage situation.
My ex-husband put in divorce papers that he will sign the house over to me. We owe $370,000 but the value is only $245,000. I have been attempting to qualify for a HAMP modification to buy me time keeping the kids in the house.
But I don't know whether to give up. I could only afford the house if my payment is lowered.
Ask Kate answers: Affordable Mortgage Payments: Keep My Home vs Short Sale
Stop for a moment and take a deep breath, then pat yourself on the back for asking your question.
Despite the best planning, you are one of many homeowners who now find themselves in an unaffordable mortgage due to unforeseen circumstances at the time of buying a home.
So let's take a step back from the emotional aspect of saving a home and examine practical options, keeping your home vs selling it
. (You'll find more in-depth information on my website by following each of the underlined links.)
Create a Written Budget of Your Expenses
Firstly, write down all of your monthly expenses. Be realistic with your budget. Don't forget to budget for unexpected housing expenses, such as a new roof or furnace.
I know making a budget can be painful when funds are tight but this is the best way to know what you can afford in housing. A budget will also keep you from making a purely emotional decision when getting a lender's financing proposal. See more at How Much Mortgage Can I Afford
Then take a few moments to check out local rentals (houses, duplexes, and apartments). At this point you just want to know how rents in your general vicinity compare to your mortgage payments. (You'll see why I asked you to do this in a moment.)
Stellar Credit Not Required for HAMP Modifications
Next, call your loan servicer to inquire into a Home Affordable Modification Program
(HAMP). If your lender does not participate in Making Home Affordable
(MHA), ask them about an in-house modification
of your current mortgage payment.
Loan modifications are primarily intended for homeowners experiencing a hardship that has made the current mortgage payment unaffordable. Because you are not requesting a new mortgage, stellar credit is not a requirement. So don't be worried that your credit history is less than perfect.
Getting a Lower House Payment That's Affordable
Through a modification of your current loan terms, your lender will attempt to lower your house payment to an affordable level. Read the offer carefully. Generally, modifications start at a below-market interest rate and adjust upward, once or twice, during the remainder of your mortgage.
But getting an affordable payment does not necessarily happen on the first offer. So don't be shy. If the proposed house payment does not fit into your budget, go back to the bank and tell them what you need. Speak up!
Additional Making Home Affordable Program Options
In addition to HAMP, there are other modification-type programs, some that could be applicable to your situation. Because I am not assured that the bank will automatically offer them, you should ask about...
Short Sale, Deed in Lieu of Foreclosure, Home Affordable Foreclosure Alternatives (HAFA)
If a combination of the above modification programs do not create an affordable mortgage payment, it's time to start looking into foreclosure alternatives, such as short sale, deed in lieu of foreclosure, and HAFA relocation funds...
- Short Sale which means the lender releases a homeowner from the obligation of a mortgage when the sales price is less than owed on the loan balance.
- Deed in Lieu of Foreclosure, simply put, means the homeowner avoids foreclosure by voluntarily turning over the home to the lender.
- HAFA Relocation, also known as Keys for Cash, provides funds of $3000 to help transition distressed homeowners into more affordable housing, such as the rentals you looked into earlier.
When all other methods fail for getting an affordable mortgage payment, you'll find these are more palatable alternatives to foreclosure.
Best wishes in your pursuit for an affordable mortgage,
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