Options Available to Avoid Foreclosure
When a homeowner begins missing payments, they may automatically give up and assume that foreclosure is inevitable. Unfortunately, many fall into the trap of ignoring lenders, hoping to bide time until they can figure a way out. This is the worst possible thing you can do. Lenders want to help; they don’t want to go through the process of foreclosing on a home. Here are some options to consider before you have to go through the last resort…foreclosure.
A borrower should call their lender immediately when they know they will not be able to make a payment. Borrowers may have the option of renegotiating their loans. With this in mind, insist on negotiating a plan that will enable the loan to be back in service. Homeowners tend to think lenders are the enemy—in fact, they aren’t. Lenders want their borrowers to do well; they don’t want to deal with defaulting loans just as much as you don’t.
Prior to a foreclosure sale, borrowers maintain the right to reinstate a delinquent loan; this option gives homeowners the chance to make up back payments on top of any incidental charges such as filing fees or legal expenses. Paying off the reinstatement amount will cancel the foreclosure.
Forbearance is the postponement for a limited time of a portion or all of the payments on a loan in jeopardy of foreclosure. Some mortgage companies are able to arrange a repayment plan based on the borrower’s current financial situation. You may qualify for this option if you have recently lost employment. Borrowers facing foreclosure should call their lender and find out if they are eligible for forbearance.
To redeem a loan, the borrower must obviously pay off the loan in full. One option to accomplish this is by having a friend or relative cosign, or, help in exchange for equity or another financial arrangement.
Sell The Property
If enough equity in the house is available that will allow the borrower to fully pay off the mortgage, then selling is the best option. This is the time to do a short sale, in which the bank agrees to “forgive” the debt if you sell the property to a third party. Lenders are more willing to agree to this, as they do not have to deal with the expenses that come with foreclosure procedures.
Filing bankruptcy will not get rid of the possibility of foreclosure; however, it can halt the process. Current foreclosure processes must stop immediately upon the filing of bankruptcy. Bankruptcy is a serious matter, and should be seriously considered and discussed with a realtor and an attorney.
Deciding to let your home be foreclosed and sent to auction upon without exhausting other options is probably the worst thing you can do. Your credit score will haunt you for years, you will lose your home along with all the payments you have put into the home. Before you throw in the towel, be sure you have explored and tried every option above before letting your home go.