No one wants to have their home foreclosed. But sometimes unforeseen events take their toll. If you’re heading into this situation, we are going to provide some tips for avoiding foreclosure that can help you. Read on to learn more about your options and see if one or more of these can help you.
What You Can Do to Avoid Foreclosure
Before we begin, you might want to read this primer on pre-foreclosures to learn more about the timeline. Knowing your current position in the process will go a long way to outlining what options are available. Then you can choose the best one for yourself.
Once you’ve missed three or more months of payments you are, in most cases, in default. This can also be called pre-foreclosure. Your available options to stop foreclosure will be contingent upon how far along you are in the process and your overall financial state.
1. Agree on the Issues with the Lender
The best of these four tips for avoiding foreclosure is to work on a possible solution with your lender. This is a viable path if your financial setback is temporary. So if you have since returned to a point where making full payments is possible, a new agreement with your lender can work. It’s likely that the lender might be willing to create an arrangement where what is owed from missed payments can be spread over a certain period of time instead of paying back all at once.
It would be wise to thoroughly analyze what you can actually afford. Setting a budget and sticking to it is key.
It is highly recommended that when you recognize that you will have trouble making payments, you contact your service provider quickly. There’s a chance you could come to terms that will allow you to avoid foreclosure.
2. Ask for Forbearance
Another potential resolution for foreclosure prevention could come in the form of forbearance. Mortgage forbearance gives borrowers who find themselves in a temporarily difficult financial situation respite by allowing them to pause their monthly mortgage payments for a given amount of time.
The expectation would be that during this period, the individual would use this opportunity to get back on track financially. Then they can begin making regular payments at the end of forbearance. Most likely you will be asked to also pay off whatever was owed during the paused time period.
3. Loan Modification Option
There may also exist situations whereby loan modification presents itself as a beneficial solution. This modifies current loan terms so that one can remain up-to-date with their mortgage and stay within their home, albeit under different conditions than what initially existed prior to these circumstances occurring.
For example, modifying could include increasing loan term length. This way the repayment takes longer and minimum payment amounts are reduced accordingly. This isn’t always combined with adjusting interest rate levels. So much depends on the particulars of your first mortgage.
4. Foreclosure Deed In Lieu
A final option available is signing a deed in lieu of foreclosure which voluntarily transfers ownership rights back into the hands of one’s lender. At the same time, you have simultaneously released any responsibility. The original contractual obligations will be removed.
Utilizing this tactic allows one to bypass an official foreclosure procedure. This can help facilitate fewer problems down the line. While not a great option for most people it can help you from severely damaging your credit score.
