Foreclosure is something that affects thousands of people each year. In many circumstances, it also comes with a significant negative impact on your quality of life.
For those who are unaware, though, there are simple steps that you can take in order to prevent foreclosure entirely. Not quite sure how to start? Let’s explore everything you should keep in mind when it comes to foreclosure prevention.
1. Forbearance
Forbearance is specifically designed to accommodate those who are having trouble making their mortgage payments. More specifically, it allows borrowers to make lower payments for an extended period of time or to skip their payments entirely for a handful of months.
Since this forgiveness is so generous, though, it isn’t offered by most lenders in many scenarios. Situations that involve losing one’s job, severe illness, or consequences of a natural disaster are often the criteria for this type of loan accommodation.
2. Reworking Your Repayment Plan
Although most lenders try their best to avoid forbearance, many are willing to reconfigure a borrower’s payment plan to help them get up to speed on their payments.
For example, someone who typically pays $2000 per month could have their lender agree to them paying $1200 per month for the next six months. While this doesn’t reduce the overall amount of money that you owe, it’s a great alternative to foreclosure that you should take advantage of if your situation requires it.
3. Short Sales
This type of sale involves putting your home on the market for less money than you currently owe on your mortgage loan. After the home is sold, you would still have an outstanding balance with your lender that they may or may not forgive
If your lender does not agree to waive the extra amount that you owe on your mortgage before you complete the sale, you run the risk of them pursuing you for this amount. It typically only occurs if you owe far more than you were able to sell your home for, though.
For instance, if you owe $500,000 on your mortgage and sell your home for $350,000, your lender likely won’t forgive the difference.
4. Selling Your House in Exchange for Cash
If you’d like to sell your home for its actual value, however, you could always look for a cash buyer. This will allow you to circumvent most of the costs that are typically associated with home transactions, such as closing costs, fees, etc.
You’ll also be able to streamline the sale, meaning you can complete it far more quickly than you would be able to otherwise. Additionally, it’s relatively easy to find a cash buyer in most areas since it’s advantageous for the buyers to avoid these fees, as well.
Although these types of transactions don’t always occur in cash, you could also look for a home investor to take the property off your hands. They typically want to complete the sale as fast as possible and will offer a generous amount for your home in most scenarios.
You can visit this resource to learn more about what type of benefits home investors are able to provide to you.
5. Leverage Your Assets
If you’re having trouble making your mortgage payments, it’s often not unwise to leverage your assets to help you pay your loan. This typically includes selling high-ticket items like cars, other property, jewelry, etc.
You can then use this cash to catch up on your payments, pay off your outstanding balance entirely, etc. But, you can also utilize your assets in a different way that comes with a large handful of benefits.
Your lender may view your willingness to sell your assets as a justification for reworking your loan terms. Similarly, they may allow you to offer your possessions as collateral in order to modify your loan repayment plan.
So, it’s often worth asking your lender about the situation in order to see how they can help you.
6. Deed-in-Lieu
As you might expect, this is an option that you should strive to avoid under most circumstances. In essence, it involves you signing the rights to the property over to the lender and then walking away from the situation entirely.
Although this will allow you to avoid foreclosure, you do run the risk of paying the remainder of your mortgage depending on your amount owed. Generally, this becomes more likely when you owe more money on your loan.
However, it allows you to circumvent the negative impact that a foreclosure will have on your financial reputation.
7. Call a Housing Counselor
Housing counselors are employed by the Department of Housing and Urban Development (HUD) to help struggling homeowners find their way out of difficult situations. Most commonly, a housing counselor will examine your scenario and then search for any relevant government relief programs that apply to you.
More often than not, you’ll be able to find financial assistance that you would have otherwise missed entirely. They can also indirectly help you with your mortgage payment by providing assistance with budgeting, managing other forms of debt, and overcoming common financial challenges that many people encounter.
Proper Foreclosure Prevention Can Seem Complicated to
But the above information will make the process far smoother. From here, you’ll be able to effectively implement foreclosure prevention and ensure that you avoid this scenario in the future.
Want to learn more info you should keep in mind? Be sure to explore what the rest of our blog has to offer.
