Many different circumstances bring homeowners to a position where they cannot afford to pay their mortgage and often times, these unforeseen circumstances cannot be avoided such as a loss of a job. There are many homeowners in Colorado Springs who have found themselves in such a position and are not sure what to do. Should I just foreclose on my house? Should I try to sell even though the market values in my area have dropped? Should I call the bank and let them know I can no longer make my payments?

There are many options if a homeowner in Colorado Springs finds themselves in this situation and the worst decision is to do nothing about it! Many homeowners ignore what is going on and hope for the best and that is a bad idea.

If you know that you will no longer be able to make your payments it is wise to call your bank and talk to them before the situation gets worse. Many banks are willing to work with homeowners by modifying their loan, freezing their interest rate on their Adjustable Rate Mortgage (ARM).

You may have heard something about the option of a short sale in the situation you cannot afford your home and are not sure what it is. To put it simply, a short sale is the situation in which a homeowner cannot sell their home to cover the amount owed on their loan and is often known as being "upside down."

In other words if you owe $170,000 on your first mortgage and refinanced two years ago and pulled $30,000 in equity out of your home and still have that second mortgage, let's pretend you still owe $200,000. You find out from your Colorado Springs Realtor that homes in the area like your own are not selling for more than $165,000. You owe $200K but can only sell for $165K and after closing costs and paying commissions there is no way you can cover the loan amount you owe. This is a short sale.

Will the bank accept the short sale if a buyer comes along who is willing to pay $165K for your home? It depends on the bank and your specific situation. When you find yourself making decisions regarding the possible short sale of your home, it is important to obtain the expert advice from a real estate attorney or other competent professional.

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