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Posted May 2nd, 2012 under Underwater Mortgage Pitfalls

Real Estate Pitfalls That People Seeking Underwater Mortgage Help Should Know

Tags: loan modifications, underwater mortgage help, underwater mortgage info

Real Estate Pitfalls That People Seeking Underwater Mortgage Help Should Know

If you're seeking underwater mortgage help, you have a number of different options. Some underwater homeowners might pursue loan modifications, for example, while others may attempt a short sale or deliberately default on their mortgage loan. The right choice for you depends on a number of factors, including some possible pitfalls related to real estate. We’ve outlined a few of the questions you need to ask yourself before making a decision about your underwater mortgage.

Are you currently living in the home? If you aren't currently living in the home as your primary residence, that could affect whether you enjoy the benefits of certain types of underwater mortgage help for homeowners. For example, you may not be protected by anti-deficiency laws, which prevent your mortgage lender from coming after you for the balance of your unpaid mortgage after a short sale or foreclosure. Not living in the home also means that you won't benefit from the Debt Relief Act, which means that you may have to pay taxes on any mortgage debt forgiven by your lender.

Do you have tenants living in the property? If the underwater property is a rental, you could face a range of difficulties. One, if you're trying to sell the home, having tenants in residence could make that more difficult many buyers are simply unwilling to buy a property that comes with renters. Second, if you have tenants who are paying rent, you're obligated to send that money to the bank, which can cause problems if you hope to pursue a short sale or strategic default.

Am I current on my HOA dues? No matter what strategy you plan to adopt to deal with your underwater mortgage, it's important to stay current on your homeowners association (HOA) dues. Even if you are able to go through a short sale, for example, the HOA could still come after you for any unpaid dues.  

When is my next property insurance payment due? In addition to your HOA dues, you need to also stay current on your property insurance payments. If your mortgage servicer typically pays your insurance out of escrow, make sure that they keep doing this; if the servicer doesn't make the payments, send a check yourself. Why is this so important? Because if your insurance lapses and something happens on the property (such as a fire or accident), you'll be liable as long as you still own the home.

Do I have any liens on the home? If you have liens on the home (such as from the IRS for unpaid taxes or from contractors), it's important to take care of them before a short sale or foreclosure. That's because the liens could hold up a short sale. Even after the short sale or foreclosure is finalized, the IRS could still come after you for the amount you owe.

Making a decision about your underwater home is complicated. There's a lot to think about, from loan modifications to foreclosure, which is why Homeowner 101 created the Underwater Homeowner Assessment and Action Plan. Our assessment will help you get the underwater mortgage info you need to make a decision and move forward with confidence.