Life is unpredictably unpredictable, and financial hardship can strike anyone at any time. Foreclosure may appear unavoidable if you have fallen behind on your mortgage payments. But don’t lose hope just yet. Here are five ways for avoiding foreclosure at the last possible moment.
1. Declare bankruptcy
If you wish to maintain your house, you should file a Chapter 13 bankruptcy, which allows you to pay off your obligations over time through a structured repayment plan.
A Chapter 7 bankruptcy is a better alternative if you want to purchase time and don’t need to keep your home. During the bankruptcy procedure, you will be permitted to stay in your home without making any payments. You can then try to work something out with the lender or save up for a new place with the money you’re earning. While declaring bankruptcy would stop the foreclosure process while you deal with your debts, it will harm your credit.
2. Modify your loan
This is very dependent on your lender, so it may not be a viable option for everyone. Some lenders, on the other hand, are willing to work out a modification that reduces the amount you have to pay each month.
You will be able to stay in your house while meeting your lender’s responsibilities if the modification brings the new monthly payment within your budget.
It’s worth remembering that lenders aren’t required to put your loan modification request on hold while they review it. Some homeowners prefer the peace of mind that comes with a strategy that puts the foreclosure on hold; if that’s the case, look into other options first.
3. Obtain a Deed in Lieu of Foreclosure (DIF).
This, like bankruptcy, will have a negative impact on your credit. A deed in lieu of foreclosure, on the other hand, gives the lender ownership of your home after a short sale. Lenders are hesitant to agree to this option since buyers may attempt to sue after the event, claiming that they were unaware of what they were doing.
This is a good last-ditch alternative if you’ve exhausted all other options for how to halt foreclosure at the last minute and simply don’t want a foreclosure on your record.
4. Initiate a legal action
If your lender is using a non-judicial foreclosure process that takes place outside of the county system, filing a lawsuit could temporarily stop the foreclosure. You are challenging the lender’s right to foreclose on the house in the case. This strategy will not work if your foreclosure is judicial because the problem has already been reviewed by the courts.
This technique is not without risk: filing a lawsuit can be costly. You must pay filing fees, and you must prove that your version of events is factual when you file a case. For a foreclosure, this involves proving the lender lacked adequate proof of ownership of the promissory note, violated the Homeowner’s Bill of Rights, failed to comply with state mediation rules, or made some other error significant enough to stop the foreclosure.
You should get legal guidance before filing a lawsuit; an attorney can tell you whether you have a case or whether there is a better method to avoid foreclosure at the last minute.
5. Get Your House Sold As Soon As Possible
The money owed to the mortgage lender must be returned. You can escape foreclosure and maintain your credit rating if you can sell the house as-is and earn enough money to repay the loan’s outstanding balance.
When you need to sell a house fast, the best alternative is to find a cash buyer who is ready to buy right away and doesn’t require mortgage financing. You won’t have to pay for any repairs, work with a real estate agent, stage and display the home, or wait for financing if you sell as-is.
What happens if I decide to sell my home?
If you’ve determined that retaining your house isn’t feasible or the best decision for you, there are still a few more options available to you:
1. Put your house on the market.
If you’ve owned your house long enough to have built up some financial equity, selling can be a wise option. Your equity is the difference between the value of your home and the amount you owe on it. If you need more time to sell, contact your mortgage servicer or holder and ask for more time before they file a foreclosure. Inquire with a professional real estate agent about whether or not selling is a viable choice. A real estate professional can help you figure out how much equity you have in your home.
2. Carry out a “short sale” or “pre-foreclosure sale.”
In a short sale, the mortgage holder agrees to let you sell the house for less than the entire amount outstanding. Get a written agreement that they would erase your debt and not try to collect any remaining balance following the transaction. You might even be able to persuade them to contribute to your moving costs. If you are “underwater,” meaning you owe more on your house than it is worth, this may be a more realistic strategy.
3. Deed in lieu of foreclosure
Your lender agrees to take the deed to your home and cancel your debt, similar to a “short sale.” If you have equity in your home, don’t ask for a deed-in-lieu. If there are additional liens on the property, the mortgage holder will not accept a deed-in-lieu.
4. Assumption of mortgage
You sell your house to a buyer who agrees to take over your mortgage. The buyer must be able to qualify for the loan, and the home must be worth at least as much as the mortgage. A fee may be charged by the servicer.
If you decide to sell your residence, bankruptcy may be a viable choice. Negotiating a “short sale” or “deed in lieu” can be challenging and time-consuming. You may also have other bills that you don’t see how you’ll be able to pay off. Bankruptcy may be a viable option, in this case, to help you obtain a fresh start and return to financial health. Before making any final decisions, you should speak with a bankruptcy attorney.
PS: This is not a legal advice, please seek a professional. This is for informational purposes only.
For information on foreclosure defense call us at (877) 399 2995. We offer litigation document review support, mortgage audit reports, securitization audit reports, affidavit of expert witness notarized, and more.