Gay Realtor answers: Can I sell if I am behind on my payments?

In short, yes. If you are behind on your payments, it may be in your best interest to sell. You will, of course, still incur the penalties associated with delinquency. Whatever your reason for selling, whether it is to transfer to another city or to get out of a delinquency situation where you face foreclosure, selling your home even if behind on payments is a viable option.

You will have to pay back your lender in full. Whatever outstanding payments you owe and the principal on the loan must be paid back. Failure to do so will permanently impact your ability to by a new home or take out new lines of credit. Late and missed payments are reported to credit unions, regardless of a reason for the lateness. Selling because you can no longer afford your home is a good idea. This is a fiscally prudent decision if you are intent on downsizing, or deflating the bloated costs of a lifestyle. Selling to avoid paying off the debts you owe is a bad idea, and will jeopardize your ability to buy a new home because it negatively affects your credit rating.

I don’t have much equity in the house--can I still get out?

Ideally, you should have enough equity—the amount of money you have paid down on the principle of your loan-- to cover your missed payments and the realtor’s fees. Realtors will take 5-6% in commission. If you have 10% or more invested in your home in equity, you should be able to sell safely. Depending on what you owe your lender in back payments and how much you can get for your home in today’s market, you should be wary of overextending yourself and winding up in an upside down mortgage. An upside down mortgage is when you owe more than your home is worth. This often happens because housing prices have fallen all over the neighborhood and, after the sale, you find you didn’t have the equity to cover the associated costs of selling a home.

Consult your lending institution before you go to sale

There are situations where, if you have more than one mortgage, you may not be able to sell without objection from your primary or secondary lending institution. If you are in the short sale process and have a second mortgage, the lending institution may not sign off on the short sale. Often this is because that lending institution has taken out insurance on your second mortgage at a cost. You could find yourself having to pay off substantial fees to cover your lending institution’s losses on a short sale and fees related to the insurance on your second mortgage.

Even if you aren’t in a short sale, consult with your bank before beginning the process of selling your home if you are behind on payments. The mortgage industry has witnessed considerable changes over the last five years, and you could be in for a surprise. Lenders are not always required to inform borrowers that they have sold their mortgage to another lending institution. This could forestall the selling process, and leave you with a mountain of debt and a huge headache.

Any of the gay real estate agents at GayRealEstate.com can guide you through the process of getting your payments caught up, negotiating a short sale with your lender, or walking you through letting the home go to foreclosure.