The last several months have put a financial strain on everyone. A lot of households have experienced some unexpected changes, including unemployment and health concerns. Even divorce rates have gone up during COVID-19 and were 34% higher in March-June 2020 compared to 2019. Needless to say, if you’re facing financial difficulties right now, you are not alone.
In 2019 almost 500,000 homeowners filed for foreclosure. Since a moratorium on foreclosures of homes with government-backed mortgages was placed in 2020, it is still yet to be determined how many households will be affected in the coming months.
If you’re facing financial difficulties or running into mortgage paying troubles but are just trying to ride things out-it would be helpful to know your options. That way, you can make the best decision for yourself and your family instead of scrambling last minute to figure out what you should do. Continue reading to learn more about legally getting out of a mortgage in Nebraska below and how to avoid ruining your credit when you do.
Can You Legally Get Out Of A Mortgage?
Ways To Get Out Of a Mortgage Legally
Thankfully, there are several methods to choose from to get out of a mortgage legally. However, some may include more severe consciences than others to get out of your house. Below we’ll cover several options you would have to get out of a mortgage and how they would affect you. The important thing to remember is to be proactive, so you don’t lose out on any equity in your home and avoid ruining your credit. The ideal situation is to leave on your terms and with some cash in your pocket.
Walk Away
Maybe the real estate market in your area is slow, or perhaps you bought your house at the height of a price bubble. Maybe you’ve been unable to refinance. Whatever the reason, you might find yourself “underwater,” or in other words, you owe more money on your home than it’s worth.
In some cases, it just doesn’t make sense to continue paying. Instead, you can walk away. Homeowners with financial means can find another residence and simply abandon their mortgaged homes.
But, defaulting on the loan is likely not an option for most Nebraskans who do not have the disposable income required to walk away scot-free.
If you consider this option, talk with your bank first about your plans, some lenders may offer another option: deed in lieu settlement. But beware, defaulting on your home loan will harm your credit.
Short Sale
Another way to get out of your mortgage legally is to sell your Nebraska home in a short sale. Short sales are different from regular home sales because you would sell at a discount and negotiate an agreement with your bank to accept less than your mortgage balance. Although, before you can sell your home in a short sale, it will involve a few steps.
- Provide proof of hardship- You will need to give the bank a reason to approve a short sale. The two most accepted hardship cases are proof of lower-income, which has made your home unaffordable, and if you’re subject to a mandatory job relocation. Your income and assets will be analyzed as well as your debt-to-income ratio. If you have any money saved, they usually require you to contribute those funds to reduce their loan payoff loss. You will also need to give them a market analysis as well as lien information on your home.
- List your property- After the lender approves you to sell in a short sale, you can move forward with listing your property, usually with a real estate agent. You will need to present any offers to the bank for their approval- which can take two weeks to several months. If you were to have a second mortgage, both providers must approve each other’s terms, making the process even longer.
- The lender approves the sale- The lender reviews the buyer’s offer and decides to okay the sale. Once approved by the lender, the short sale can close as soon as the potential buyer gets loan approval, funding, and closes.
On the plus side, short sales have a less severe impact on your credit score than a foreclosure would. Usually, your credit score will drop by 75 to 200 points when selling in a short sale. For reference, experts estimate a foreclosure will lead to a credit score of 200 or 300.
Bear in mind lenders often won’t consider approving a short sale until you are two to three months behind on payments. Late payments can impact your credit score too. Short sales stay on credit reports for seven years, but you can try to finance a new home purchase within one to four years following a short sale depending on the down payment, credit score, and loan type.
The biggest downside to selling in a short sale is the lender has control over which offer to accept and timeframe. So you may be sitting in limbo for a while waiting for the lender to accept an offer they like. Furthermore, even if the lender agrees to a short sale, they might try to hold you liable for the difference between the mortgage value and the sale price. Chances are you won’t walk away with any profits from your home’s sale and won’t have any involvement with the selling process.
Deed in Lieu of Foreclosure
An alternative to walking away from your property is a deed in lieu of foreclosure. A deed in lieu of foreclosure is a binding legal document that transfers ownership from you to your lender, but the lender releases you from the mortgage in exchange.
Usually, what the lender will do is sell the home and keep the proceeds. However, keep in mind that you may still be liable for the difference or deficiency in price, so make sure to do your research before proceeding with this option.
Foreclosure
If you get behind on mortgage payments, your lender may file for foreclosure. Nebraska foreclosure laws are specific to how this must be done and the time frame your lender must give you before officially proceeding with foreclosure. There is a period of time you will be given to try to figure out solutions such as payment options or selling the house in a short sale, but avoiding the situation would not be a good idea.
Although foreclosure is legal, it is the least desirable way to get out of your mortgage in Nebraska, especially if you don’t have alternative housing options. Plus, a foreclosure on your credit history is harmful for several years. The best thing you can do is avoid foreclosure at all costs and look for other options like selling your home instead.
Sell Your Home
The least stressful way to get out of a mortgage would be to sell your Nebraska home. And working with a legitimate home buying company can make that possible. Although you may receive a below-market value offer, you wouldn’t have to pay money out-of-pocket to sell your home like you would in a traditional home sale. This means no real estate agent commissions, no renovation costs, and no expenses typically seen with getting a home ready to show.
Plus, when you work with a local cash home buyer like Element Homebuyers, the home buying process can be completed in about a week. Selling a house for cash to a home-buying company like Element allows you to beat a foreclosure filing, resolve estate issues, or liquidate your assets quickly. And the best part, you’re in control of selling your home, and your credit remains unharmed! This is undeniably the fastest way to get out of a mortgage contract legally in Nebraska.
Rent Your Home
Another option is to rent your home as a solution to get out of your mortgage in Nebraska legally. The pros to keeping your house and renting it out are that a tenant can help pay your monthly mortgage, which will go towards paying down the entire balance. However, renting your home out will involve:
- Getting the house ready and doing repairs.
- Finding a reliable tenant.
- Coming up with a legal lease agreement.
- Moving your stuff out.
- Finding other housing arrangements for yourself.
This can be challenging to come up with the money to cover these expenses, especially if you’re falling behind on your mortgage payments. Not only that, but it could take several weeks to do all these things, let alone find a decent tenant.
Although Nebraska is a moderately landlord-friendly state, you’ll have to keep in mind your tenants will have rights too. Truthful, right now may not be the best time to become a landlord since evictions are on hold because of COVID-19. So god forbid your tenant isn’t able to make their monthly rent payment, you don’t have any legal way to evict them right now, which could put you in a worse position than before. You may have to cover both payments, the mortgage payment and the payment for your current living situation.
Even though you would get to keep your house, it may end up being stressful to be a landlord, and you still would need to cover unexpected expenses that might pop up while someone is renting the place. You may think you found the perfect tenant to rent your property, and the first few months are wonderful, but even good tenants can become bad.
Conclusion:
Whatever your current situation, the good news is that you have options to get out of your mortgage in Nebraska legally. The best thing to do is face the problem and figure out an ideal solution for yourself and your family. As you’ve seen, some scenarios leave you with nothing or affect your credit, other options allow you to keep your house but may require drastic changes to your finances to continue to manage everything. Dealing with this particular situation can be stressful, which is why selling the home and finding a more suitable living situation would be perfect.
If you were to sell to a home buyer vs. in a short sale, you would be able to decide when you’d like to sell, how much you’d like to sell for, and move out on your schedule. In a short sale, the bank may require an agent to sell the property, which leaves you paying an agent’s commission. That’s several thousand dollars that you would otherwise be able to keep if you were to sell to a home buyer like Element Homebuyers.
If you’re struggling to figure out how to get out of your mortgage in Nebraska legally, give Element Homebuyers a call. They can make you a cash offer for your home within 24-hours and close on your house within seven days. Element Homebuyers works with Nebraska residents with unique selling situations, including:
- Foreclosure
- Bankruptcy
- Unfinished construction
- Foundation damage
- Water damage
- Termite damage
- Title issues
- Code violations
- Hoarder houses
- Inherited properties
- Divorce
- And many more
If you’re looking for a way to sell your home fast without having to hire a realtor, pay agent commissions, services fees, or closing costs, then Element Homebuyers is the buyer for you!
Visit their website for more information about their fast home buying process and details about their company. Element Homebuyers is a BBB accredited business with an A rating and has all 5-star reviews on Google. They buy houses in Nebraska and all surrounding areas like Lincoln, Omaha, Bellevue, Hickman, Papillon, and many more.