How to Stop a Foreclosure: 5 Ways to Stop the Process
Wondering how to stop a foreclosure? Here are 5 ways to end the process.
You already missed three consecutive mortgage payments. Then you come home one afternoon and receive a letter. Upon opening the envelope, you see the reality of foreclosure staring right in front of you.
Though the rate of foreclosures in the United States is down, it still affects millions.
Just recently, it is the senior citizens who are facing the possibility of losing their homes.
But did you know that you can still avert a looming foreclosure?
Continue reading below as we teach you how to stop a foreclosure.
How to Stop a Foreclosure from Happening
The threat of foreclosure appears once you miss your mortgage payments consecutively. People have different reasons for missing their payments. Some lose their jobs unexpectedly, while others go through a sudden medical emergency.
There are also some homeowners who find themselves in so much debt. But regardless of your financial woes, you can still reverse the situation. Here’s how to stop a foreclosure in five ways:
Work Out a Compromise
Even if you have the foreclosure letter in your hands, you can still work out a compromise with your lender. You can do so up until the day of your home’s auction.
Talk to your lender and try to agree upon a forbearance plan. This involves the bank accepting partial payments or suspending them altogether. The catch, however, is that the forbearance will only be good for a limited time.
The offer usually runs until the bank can resume with the repayment schedule.
Forbearance involves a written agreement between you and your bank. Depending on your agreement, you will either settle a small portion of your mortgage or you will forgo your payments within a specific period of time.
When the time period lapses, the bank will require you to resume your regular monthly payments. In addition, the bank may also require you to pay additional fees.
The idea of a forbearance plan is to buy you some time to settle your financial challenges. In some cases, a forbearance plan may lead to loan reinstatement, which we will discuss below.
A reinstatement means bringing your loan current. This happens when you pay the total amount that is past due. On top of the past dues, you will likely have to pay additional costs.
To pull off a reinstatement, you will need to work doubly hard during the grace period. You need to settle your other debts in order to restore your financial capabilities. Once you get out of your debt hole, you can request your lender for a reinstatement.
To bring your loan to a current, you can expect the lender to increase your monthly payments. This will allow you to catch up faster until the loan becomes current.
Once you cover all your past due balance, the mortgage company will restore the original amount of your monthly mortgage.
In addition, you need to prepare for some legal fees. These added expenses usually appear if the foreclosure process is already underway.
Perform a Short Sale
There is this crucial period between the time you receive the foreclosure notice and the schedule of the auction. You can use this time to stop the foreclosure by pulling off a short sale.
A short sale happens when someone offers to buy your property during this particular period. You will show the offer to your lender. The lender, in turn, will see if it can agree to discount your loan balance.
The idea is you will sell your property for a value that is less than your loan’s outstanding balance. After the sale, the proceeds will go to your lender to cover your debt.
Do keep in mind that your lender has the power to accept or decline a short sale offer. Generally, lenders accept short sales because it saves them more time and resources.
A short sale means the lender does not have to look for a buyer for your property. It also means they will save more money from all the requirements that come with the foreclosure process. In addition, a short sale helps keep your credit history free from foreclosures.
So even if your home is already in the market, continue searching for home buyers.
Pitch a Lease-Option
Another option that involves a home buyer is the lease-option. In this scenario, a prospective buyer will become your tenant. He will live inside your home but you will remain as the property owner.
The idea is for your buyer to use the time until they save enough money. They can raise money for a down payment or restore their credit. Once they do so, they will have the option to acquire your property.
In turn, you will use their payment to bring your loan current. The buyer will pay you for the monthly lease. You will then use these payments to settle your outstanding mortgage balance.
File for Bankruptcy
Lastly, you have the option to file a bankruptcy petition. The law states that mortgage lenders and debt collectors cannot pursue you once you file for bankruptcy. Basically, bankruptcy stops a foreclosure effectively.
But the real battle comes after filing, and it takes place in the courtroom. What bankruptcy does is it buys you more time to recover from your financial struggles. If you lost your job, bankruptcy gives you a chance to look for a new one.
But it doesn’t wipe out your outstanding debts.
What you and your lender can do is to agree on a repayment plan. This will allow you to pay off your debts in a reasonable manner.
Stop a Foreclosure, Today!
Learning how to stop a foreclosure is part of the complex dynamics of real estate. If you are looking to sell your property to avoid foreclosure, we will gladly extend a helping hand.
Simply get in touch with us and let us give you a fast and fair offer. We buy homes in Boise in the simplest way possible.
We don’t require any repairs on your part. We also let you choose the closing date!
Sell your home and avoid foreclosure, today!