While facing the possibility of foreclosure on your home is frightening, it is not always unavoidable. There are many tools and solutions available to assist you with staying in your house, as well as loss mitigation strategies if staying in your home is no longer possible.
Here’s how to avoid losing your home to foreclosure before it’s too late.
What Is Foreclosure?
When a borrower stops making payments on their mortgage debt, the legal procedure of foreclosure is used by banks and other mortgage lenders to recuperate their losses.
When a borrower takes out a mortgage to buy a home, they agree to make monthly payments to their lender until the house is paid off. If a borrower can no longer make their loan payments, usually due to financial difficulties such as a job loss, the lender will try to recoup some or all of the money owing by taking possession of the home and selling it.
When a homeowner’s home is foreclosed on, they are evicted from the property and the foreclosure is noted on their credit report, which has a negative influence on their credit score.
How To Avoid this
If you haven’t yet reached the point where you’re missing payments but suspect that you will, or simply want to be proactive and ensure that you have a safety net in place in the event that you find yourself in a financial bind, here are some things you can do to avoid foreclosure in the first place.
Obviously, making your monthly mortgage payments a priority is critical. While most people who wind up in foreclosure are aware of the need of making those payments, they frequently lack the financial means to do so.
This is why it’s critical to have an emergency savings account or other liquid assets. If you’re able to, putting aside a few months’ worth of living expenses can go a long way toward guaranteeing that if something catastrophic happens, you’ll have enough money to get by for a time.
If you lose your source of income, for example, this emergency fund can provide you with enough time to find a new career without risking losing your home.
If your mortgage payment is stretching your budget too thin, you should consider refinancing your mortgage to lessen your monthly payments.
This can be a useful alternative for those who are still able to make mortgage payments but are beginning to feel overburdened by their monthly housing payment owing to a decrease in income, increased household costs, or a monthly payment rise on an adjustable-rate mortgage.
If you foresee having trouble making payments, it’s also a good idea to keep in touch with your lender on a regular basis. In most circumstances, your lender would want to work with you to find a solution that keeps you in your house rather than have to go through the lengthy and costly process of foreclosure.
Here are 6 Ways to Avoid Foreclosure
If you’ve missed three or more payments and are in default or pre-foreclosure, your choices for stopping the foreclosure process will depend on how far along you are in the process and how bad your financial position is.
1. Talk to your lender about it.
If you had a brief setback that stopped you from making your mortgage payments for a period of time and is again able to make full monthly payments but can’t afford to pay back the missed payments in one lump amount, this is a suitable choice.
Your lender may be ready to work out a repayment plan with you to bring your past-due loan back on track, as long as you can make payments in the future. The lender will add the amount you owe in missed payments to your normal monthly installments as part of this repayment plan, allowing you to pay back what you owe over a set period of time.
When you’re working with your lender to come up with a repayment plan, be honest about how much you can afford to pay each month and don’t agree to pay more than your budget can manage.
2. Make a Forbearance Request
Mortgage forbearance permits borrowers who are having temporary financial difficulties to put their monthly mortgage payments on hold for a certain length of time.
It’s expected that you’ll use the forbearance period to get back on your feet and ready to resume making your normal monthly payments, as well as paying back any debt you accumulated while in forbearance, at the conclusion of the time period provided.
The most important thing to remember about forbearance is that at the conclusion of the time, you will owe the amount that was suspended. So, if you were in forbearance for five months, you’ll have to pay back five months’ worth of mortgage payments at the conclusion. This can be done as a one-time payment or as part of a repayment plan.
3. Request a Loan Modification
A loan modification, as you might expect, alters the terms of your present loan. If you aren’t qualified for a refinance, a loan modification might help make your monthly payments more manageable, allowing you to stay current on your loan and keep your property.
Extending the loan term to give you more time to pay it off while lowering your monthly payments is a popular sort of loan modification.
4. Seek advice from a HUD-approved counseling agency.
If you require professional assistance, the Department of Housing and Urban Development (HUD) funds housing counseling agencies across the country that offer loss mitigation counseling to people facing foreclosure. These services are usually given for free or at a low cost.
5. Carry Out A Short Sale
If you aren’t eligible for any payment restructuring options that would allow you to stay in your home, your only other choice to avoid foreclosure is to sell it. The so-called short sale is one of these choices.
You sell your home for less than what you owe on it in a short sale. Your lender receives the proceeds of the sale and, in most cases, forgives part or all of the outstanding balance. Before you can pursue this option, you’ll need to acquire clearance from your lender, since they’ll have to agree to accept less than what you owe on your loan.
6. Sign a Deed In Lieu Of Foreclosure to avoid foreclosure.
A lender may accept a deed in lieu of foreclosure to prevent foreclosure, which is when you voluntarily surrender ownership of your home to your lender in return for being released from your mortgage obligation. This permits you to avoid going through a formal foreclosure process.
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.