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If you’re facing foreclosure, getting behind on your payments, or need to move but are “underwater” with your mortgage, help may be on the way. The new program is called: Home Affordable Foreclosure Alternatives

After the government’s abysmal failure to modify loan mortgages, they are finally giving some help to the win-win situation: a short sale

What is a Short Sale

A “short sale” is when the homeowner sells their house on the open market, but the bank agrees to a sale that is less than (“short” of) the mortgage balance owed.

The government’s new program will in some cases even help the homeowner transition to new housing with a $1,500 cash allowance. Why? Because they want to stem the tide of foreclosures, and a short sale is a decent alternative. Obviously keeping people in their home would be best, but it’s just not possible for millions of homeowners right now. The program will also give $1,000 to banks who participate in the program.

Short Sales Take Time

As someone who successfully went through a short sale, I will say this: it’s not an easy process. This new law should speed up the process a bit, but it still can take a very long time. I was lucky to work with a very experienced short sale real estate agent, and I would highly recommend you do the same if you’re thinking of going this route.

I’ve written quite a bit about short sales including:

• Foreclosure vs Short Sale – Who wins? Short sale for the win
• Avoiding Foreclosure With a Short Sale
• What happened when I got a Notice of Default posted at my home
• Find out what a deed in lieu vs a short sale
• Short sale credit issues
• taxes on a short sale

Short Sale Better in the Long Run

My take on a short sale is to think about it from a future lender’s point of view. Rather than just stopping all communication and “walking away”, you work with the bank to get an agreeable amount for your house, and you at least make the effort. It will hurt your credit score, but it won’t destroy it, and from a Banker’s point of view, it looks much better than a foreclosure.

It’s been about 1 1/2 years since I completed my short sale, and my credit score has returned to the 660 range.

What would a foreclosure lawyer do?

If you are the home owner, a foreclosure lawyer would help you determine your options: modifying the loan if possible, bankruptcy, walking away, etc.

As a renter, if your the place you are renting goes into foreclosure, you have rights. Actually you have more rights than ever with recent legislation. A foreclosure lawyer would be able to help you stay in the home, or help you determine what options are available to you and review your lease contract.

While a lawyer is usually helpful

They are also usually not cheap. If you are facing foreclosure, there are lots of options available to you.

When I was losing my house, since I had virtually no assets, I decided to do a short sale. A short sale is when you sell your property for less than what the balance of your mortgage is. The process sucks, and it can take forever, but at least in my case it was the best option.

I was able to short sell my house, and didn’t have to sign a note to cover the balance. I had a good real estate agent experienced in short sales, and that helped quite a bit.

Pick up the phone and call 2 people

I would say it’s probably worth at least a quick phone call with a lawyer if you are facing foreclosure, but also a real estate agent that has experience in short sales. The real estate agent won’t have any out of pocket costs to you (as they only get paid if they sell the house).

If you are facing foreclosure, try not to get too down on yourself. A lot of people are in your boat, and you will recover from the process!

I explained my bankruptcy and the short sale and showed my income (all on the personal side) and student loans. I’ve had no late payments on anything since my bankruptcy.

I wrote a letter explaining how I got into this mess that I guess goes to the underwriters.

I really just wanted to find out if it is even possible in the next year or so to get a mortgage. There are some places now I’m seeing that are similar to where I am renting that I could purchase and actually have a lower monthly mortgage payment than my current rent payment.

No deal said the bank. Which is fine….

Short sale 2 years ago was deal breaker

What was interesting is that my loan officer said that everything was fine (even the bankruptcy just being discharged a little over a year ago)…

except for the short sale I did. That killed the whole deal. I actually thought that might have helped a bit. Rather than just walking away from the home, I at least worked out a short sale to avoid foreclosure.

It wasn’t enough.

It’s fine. It actually just makes me want to work harder. Screw a mortgage, I want to just pay cash for my next place. Plus, my girlfriend said something really nice to me this weekend, “I don’t need a house. I would live in any size apartment with you” she said. Not that we are planning on living together anytime soon, but it was nice to hear.

Actually glad I didn’t get the loan

I’m actually a little glad I didn’t get approved. It would have been a distraction to me mentally to know I could buy a place. I’d waste time looking at listings when I should be working to pay off my Mom!

Sometimes I think I’m a trendsetter.

But not in good ways. Right now you can’t watch any news program without hearing about rising debt levels and thousands of people losing their homes to foreclosure.

Hmmm…that definitely sounds like me circa late 2006-early 2007. It seems like such a long time ago, but really, it was a little over a year and a half ago now that my home was facing foreclosure, my water had been turned off, and I had buyers walk in while I was showering.

Looking back, even though I lost the home, I should have never had it in the first place. Plus, I was able to do a short sale and get the place sold before it went to auction. But it was still a very stressful event.

So here are a few tips for staying sane I discovered when dealing with my own home foreclosure:

1. Tell a friend

Once you hit a certain number of payments behind (it varies state to state. Usually around 3), you’re default becomes public information. So, before that even happens, tell for sure your family, and next a close friend. Facing foreclosure is not a process you want to go through alone.

2. You’re not a failure. So let go of your pride.

Maybe you shouldn’t have bought the home. Maybe you lost your job. Maybe this, maybe that. The bottom line is that beating yourself up isn’t going to solve your issues.

Also, trying to keep up appearances is just plain silly. Especially if you’re in a very hard hit area (vegas, california, florida, etc), most of your neighbors are probably in the same boat (if they are still around at all). So let go of your pride, cut your spending as much as possible, and prepare for the future.

3. Line up future housing ASAP

For me, I didn’t have the income to support both a place to live and my office at the time. So I moved into my office and slept there for a few months. I wouldn’t really recommend it. Once you know the last date you have in your home (weather an eviction date, sale date, or auction date), start making plans for housing after foreclosure. Craigslist is probably your best bet….and honesty with a private owner goes a long way.

4. Ignore or laugh at your mail

You’re going to get a ton of foreclosure junk mail. People will promise you the world in this junk mail. Some of it will look somewhat official. Take it all with a grain of salt.

My favorite game was to do a mass opening about once a week and find the most outrageous letter and then just make fun of the sender in my head. Don’t respond to anything you get in the mail. Work with a short sale agent if you want to go that route, but make sure and ignore 90% of that junk mail, and laugh at the other 10%.

5. Learn from this experience

For me, losing my home was just another painful lesson that I needed to go from the selfish, short sided, financially illiterate mess that I once was. Think I’ll ever buy a house again with no down payment? Heck no. Do you think I’ll think twice about renting to crazy roommates? Hes yes.

In nearly every difficult situation, there are lessons to be learned. I know that’s hard to see when you are in the thick of it, but it’s true.

Good luck and if you’re looking for more support, check out the insanely useful comments (300+) on my countrywide short sale post.

After short selling my home last year, I faced a pretty big problem:

Where the crap am I gonna sleep?

While I avoided the house going to auction, I lost my place to stay. I was lucky enough to still have an office floor to sleep on, and a car that I stayed in a few times as well.

What about the people?

I keep reading about these billions of dollars getting written off by financial companies. What I don’t hear about so much is what’s happening to all the people involved in these loans gone bad. With thousands of family losing their homes…where are they ending up? (not to mention their pets?)

I had a heck of time finding a place to live after my two month “GAP” in housing. I was really quite frustrated with the process. So, here are a few lessons I learned about creative living situations and finding an apartment after a short sale or foreclosure.

Temporary Housing Solutions

1. Live at your office

If you work in a smaller office building that you have 24 hour access, you can get away with living there for some time. I lived, ate, cooked, for 2 months in an office building. It wasn’t easy, but it can be done.

Tips:

- Join a gym close to the office. You need to be able to shower, shave, and wash up. Join a gym close to the office. It may cost $30 a month, but you must have a place to keep yourself clean. If you have a fear of public showers…well, now is the time to get over it.
- Wake up before anyone arrives at your office. Head to the gym, work out if you’re in the mood, or just shower and get ready for the day. Time this so that you arrive ready to work back at the office. To any outsider it just looks like you arrived after working out at the gym (which is the truth)
- Assuming you are storing your personal items in your car, be sure you have a small camping pad, and blankets or a sleeping bag that you can easily tote from your car to the office without arousing too much suspicion.
- If someone ever comes into the office after hours, make sure you have a computer up and running so that you have a cover story (ie, project deadline tomorrow, working overtime)

Here are some of my posts from when I was living in my office:

• Office life Day 4
• Cops at my office
• Office life Day 12
• Turned down 20/20 Interview
• Success, yay

2. House Sitting

House Sitting is a great way to have a bed or couch to sleep on without mooching on a friend or family. Plus, you’ll even earn some extra cash while you have a place to stay. I did this for a week after my house sold, and it was a good transition to living simply, and then living in my office.

Tips:

-Post fliers at local colleges, supermarkets, or online at craigslist.
-Have a single page resume with references prepared to send to any potential clients.
-Be a pet-friendly house sitter

3. CouchSurfing.com

This site is not meant for long-term stays, but you could easily go from place to place in a pinch. Just make sure and do the dishes! You’ll want to keep a positive rating to keep utilizing the kind souls here allowing you to crash for free.

4. Stay with friends or family

If you have family you can stay with, this is an obvious first choice. Just be careful about overstaying your welcome. The whole point of these tips is to get you to permanent housing eventually. If you’re staying with a friend or family member, you should be saving money and trying make a plan to deal with your housing situation.

Tips:

-Have a defined move out date. This will motivate you and reassure the person you are staying with.

5. Live in your car

There were a few nights when I was just so beat from a full day that I ended up curling up in a sleeping bag in the backseat of my car. It isn’t the most comfortable solution, but in a pinch, or for a short term solution it works.

Tips:

- When you stay overnight in your car, be sure to do it in different locations each night
- try quiet neighborhoods that are in nicer areas of town.
- make sure to move your car at least once a day so that suspicions aren’t raised.

Finding A Place

Save, Save, Save

While living in my office was a good move financially, after about the 6th week, I started getting a little stircrazy. You need to be saving money for a deposit and first/last on a place to live. A housing gap can be overlooked by a landlord, but you’re going to have to have a deposit plus first and last to counter that gap and your likely low credit score.

Tips:

- If you haven’t sold stuff already, now is the time. You don’t have the money for storage, and if you can’t fit your possessions in your car, you need to simplify.

Once you have enough cash saved up, getting a place can still be incredibly challenging after you’ve lost a home. Why? Because your credit is now in the tank. If you’ve lost your home, or even short sold it, it’s likely, like me, your credit score tanked. One of the biggest items landlords look at is that credit score.

The foreclosure or short sale of your home isn’t exactly the best indicator to a landlord either.

1. Craigslist

With a crappy credit score, but a decent chunk of change, your best bet to find housing is craigslist. Look for individuals (not real estate companies) listing places to rent.

Craiglist also has loads of sub-let ads. If you just need a room to yourself, you can save hundreds of bucks each month by subletting a room in a house, or condo. Individuals on craigslist in the sub-let category are your best bet to avoid a credit check. If you’ve got a job, and cash for a deposit, you should have no problem getting a room.

Another option is looking for cheap condo’s that are up for rent. These are often going to be a private landlord, and with the glut of condos built in the last few years I’d bet you can find some with rents similar to traditional apartments.

Tips:

- If a landlord wants a credit check, explain honestly that your credit is not good, but that you are trying to rebuild it and that you are trying to avoid hard pulls on your credit.

2. Your Church

Most churches have bulletin boards (offline and online ones) where people are always looking for roommates or posting homes/apartments for rent.

Closing The Deal

When you’re looking at places, make sure you’re dressed nicely and cleaned up. Be prepared to talk about your work. If the landlord doesn’t ask where you’ve lived the past month or weeks, don’t feel the need to bring it up. Avoid lying, but you don’t need to spill your life story, or how you’ve been living in your car the past month.

Good luck, I hope you find a place soon! Remember…a place to sleep is important. A bed is nice, but be thankful that you’re alive, and for the people in your life that care about you. Just because you screwed up in the past doesn’t mean you’re a screw-up, it just means your human.

Got a tip?

If you have a creative housing tip or suggestion, feel free to add it in the comments section. I mostly drew from my own experiences here, so I’m sure I missed some good resources.