Foreclosure is the worst nightmare for many homeowners. Maybe you’ve lost your job, gone through a divorce, had a prolonged illness, or experienced another a life-changing situation that made you fall behind on your mortgage payments. Now, you risk getting your home repossessed. However, if you’re facing this problem, you don’t have to give up automatically; there some actions you can take to eliminate or at least delay the process. Let’s look at a step by step definitive guide to avoiding foreclosure.
Acknowledge the Problem:
One mistake many homeowners make is ignoring the problem. They assume that if they ignore it, the problem will get solved on its own. However, that’s not the case with foreclosure. If you don’t acknowledge it, the problem will only worsen as time passes. The more your debt accumulates, the harder it will be for you to reinstate your loan. Therefore, realize that you’re facing an imminent foreclosure, and stay open to options that can help save your home.
Don’t Avoid Communication From the Lender:
The first piece of communication the lender will send you will deal with your late payments, and it’ll include some advice on avoiding foreclosure. The second piece of communication will be about legal action. Don’t ignore these letters and claim you never saw them. You should open them, read through, and respond as soon as possible. If you don’t respond, they’ll initiate legal action, and you may end up losing your home in the process. Don’t let the problem grow bigger; open those letters, receive those phone calls, and respond.
Communicate to Your Lender:
Once you realize that you’re facing foreclosure in the near future, get in touch with your lender to have discussions on the matter. They may not be looking to possess your property. If you talk to them and explain why you’re unable to make payments, they may evaluate your problem and offer practical solutions. For instance, they can adjust your payments or even re-schedule the installments to help you pay them easily. Also, they may provide forbearance as a solution. This is where the mortgage company suspends your payments temporarily for a certain time period.
If needed, you can get the help of an approved HUD housing counselor who can communicate and handle the matter professionally and effectively. Also, they can help you understand the law and evaluate your options.
Use the Resources You Have to Produce Cash:
Once you and your lender have agreed on a new repayment plan or a reduction in the payments, you must look for ways to raise money for the new installments. Is there anything to can sell to raise some money, such as a motorcycle, painting, an extra car, or jewelry? Is it possible to get a second job? If you want to really save your home, be ready to make sacrifices. Also, cut on unnecessary spending. After your healthcare bills, your priority should be mortgage payments. Eliminate things such as eating out and gym memberships.
Foreclosure Prevention Deals and Scams are a No-No:
No matter how desperate you are, don’t allow shady prevention deals and scams take advantage of your unfortunate situation. Some people may contact you and ask for a fee, claiming that they’ll help you prevent foreclosure. However, don’t fall for their luring deals. If you had $700, which option would make more sense? Risk paying someone who may or may not help you or pay your lender? The latter makes more sense. Therefore, make the right choices.
Other Options to Avoid Foreclosure:
A Short Sale:
If you’ve suffered long-term financial hardship, are unable to finance your loan and have little to no equity in the home, then having a short sale is a great option. However, you may need to talk to your lender first and see if they’ll agree. What is a short sale? This is whereby your home is sold at a lesser amount than the debt you owe. Even though the proceeds of the sale won’t cover all your debt, your lender may agree to save their time and effort when looking for a new buyer. However, keep in mind that a short sale will hurt your credit.
A Deed-in-Lieu of Foreclosure:
This where you sign paperwork and give up your home rights to the bank. But, even if it sounds like a great option, it will have the same effect on your credit as the foreclosure. How do you go about the process? First, you need to approach your lender, explain your financial hardship, and ask for a Deed-in-Lieu form. You may need to prove that you’re unable to finance the loan completely by showing things such as your expenses and bank balances. If they agree to it, they’ll give you an application to fill out.
From there, you’ll wait for several days for them to approve. If they approve, get a real estate attorney to help you understand the documentation before signing. It may cost you some money, but you will understand everything.
Filing for Bankruptcy:
Even if bankruptcy will hurt your credit, it’s another option for people looking to avoid foreclosure. After filing for bankruptcy, the law prohibits your lender from continuing with their collection activities. However, it’s vital to note that bankruptcy does mean that you won’t pay your debts; it just gives you some time to recover. After you’ve recovered financially, you’ll pay your debts based on an agreed payment plan. Since there are two types of bankruptcy, Chapter 7 and Chapter 13, get the help of a knowledgeable and experienced bankruptcy lawyer to advise on the best option based on your situation.
Selling Your Home Fast:
If any of the above options don’t appeal to you, you can choose to sell your home, pay the defaulted debt in full, and stop the foreclosure process. This will leave even leave you with extra cash for bill payments, moving expenses, and emergencies. However, if you’ve chosen this option, you need to act fast. The foreclosure process won’t stop because you’re attempting to sell your home. You can get a real estate agent to help you get a buyer quickly, pay off your debts, and get a second chance with a new affordable home.
Hopefully, this guide has given you valuable tips to avoid foreclosure. Remember that just because you’re in a tricky financial situation doesn’t mean you’ll have to lose your home. There are options out there, so try and utilize them.