Options to Avoid Foreclosure
You no longer have to bury your head in the mortgage pile when you notice that potential problems have arrived, which may cause you to think about the dreaded foreclosure. Having extensive knowledge of alternative options can help you avoid foreclosure, if you decide to act quickly. Although it may be hard to make a decision to sell your home before a foreclosure is eminent, having the right knowledge could save your credit from extreme damage. Yet, first you must make yourself aware of situations which could trigger a foreclosure.
Things which May Trigger Future Foreclosures
- Extreme and unpredicted home repair costs
- Sudden firing from job or layoff
- Second income loss
- Family death or illness
- Mitigation costs
- Medical Emergencies
- Unavoidable interests rate change
- Too much debt or other obligations
- Job demotion
- Inherited debt
Alternatives to Foreclosures
Foreclosure is always the last resort, and never the first choice when you get into a sticky spot with your mortgage payment plan. Instead, try one of the following options in this guide to help you avoid the entire foreclosure process.
1. Sell the Property
One of the easiest alternatives to a foreclosure is to simply put your home up for immediate sale. This may mean finding quick alternatives to sell your home, and possibly lowering the price. Although you may lose some equity in the home when you sale it, it is better than having a foreclosure on your credit. You may think that you do not have enough time to sell your home before a foreclosure occurs, but often times, many homeowners like you choose to sell their home through a short sale process or to use listing agents to help them sell the property.
2. Ask for Forgiveness
Another foreclosure alternative that you may not have thought of is to simply ask your lender for loan forgiveness. You will not be asking for complete loan forgiveness, but you will only ask for a portion of forgiveness to which you are currently behind. This could mean that if you have a great track record of paying your payments on time, or even early every month, your lender may give you a legal document which states that the one or two notes that you are behind are totally forgiven. Debt forgiveness will simply waive away any back payments you owe.
3. Go for a Refinance
Another alternative to foreclosure is to attempt to refinance your mortgage loan. This will allow you to pay off your current lender, start a fresh payment system and will help you to maintain your credit. Although refinancing is not always undemanding within unpredictable economies, you can find alternative lending sources, which will work with you to refinance your home. Perhaps, you may even find a new lender which will lower your interest rate on either your first or second mortgage.
4. Loan Change of Terms
If you have good history with your lender, you may be able to ask for a complete change of loan terms. Your lender can reevaluate your situation, and allow you to sign a different loan agreement. Therefore, your back payments will be totally wiped off your record.
5. Make a Partial Claim
If you have obtained certain loans from the government, you may be able to utilize a partial claim program. A partial claim will allow you to pay off any back payments you owe by taking out a new loan. Although you will have to make payments on a new loan in addition to your regular payment, it will be well worth your time to avoid foreclosure.
Another alternative to foreclosure is taking advantage of any loan reinstatement offers from your lender. With a loan reinstatement, your lender will offer you a bargain, which will allow you to make up the back payments for your loan and resume your mortgage payments as if you were never behind. Although you may have a 30-day late or more on your credit history, this will give you some time to keep your dwelling.
Another scenario you may consider is to ask for a forbearance agreement between you and your mortgage lender. Within a forbearance period, the lender will give you a short period of pardon in which they will reduce or defer your payments. During this time you can secure another job, borrow more money, ask for a raise, or do what is necessary to begin to meet your obligations when the forbearance period is over. Moreover, during this period you can also ask the lender to place any missed payments you owe at the back of your loan agreement.
8. Deed in Lieu
A Deed in Lieu of foreclosure is another option that you can use as a last resort. You will usually need to consider a deed in lieu when you are having a hard time selling your property. Furthermore, if you are unable to reinstate your loan or get your lender to agree to forbearance, then this option can keep you from foreclosure.
Under a Chapter 7 bankruptcy, once lenders ask the judge to let go of the "automatic stay" and the court agrees, any foreclosure proceedings can resume to normal. Therefore, choosing a bankruptcy to help offset a foreclosure is only a transitory option. Moreover, even if you do file for bankruptcy, you will still need to figure out a way to pay for all of your secured creditors.
10. Add Back Payments to Loan Balance
Another option you can utilize instead of foreclosure proceedings is to ask your first and second mortgage lenders to tack on any payments in arrears to the end of your loan balance. This can work for you because it is a better solution for you and the lender. You lender might even ask you to pay a higher interest rate on this portion or the loan, or to pay addition fees associated with your balance, but it will be worth the effort to avoid foreclosure.
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