You risk foreclosure if you fail to make your mortgage payments—that much is true. Foreclosure is the legal process that allows a lender to repossess or take control of a home. Unfortunately, should this ever happen, it means there’s very little you can do but to move out of the house.
Suppose the property’s value is less than the entire amount the bank lent. In that case, the homeowner might face a deficiency judgment, a court order issued against a borrower who does not have enough money to repay their loan. Should this occur, a homeowner will lose their property, and the court can order them to pay additional costs to the lender. But the worst part is that foreclosures and deficiency judgments can negatively impact your credit score. This leads to a more challenging time qualifying for future credit needs.
Ultimately, the best way to prevent foreclosure is to not be in a position that leads to it. However, that alone isn’t good advice. When you think your property is about to be foreclosed or are projecting that your current financial status will not allow you to keep your property for long, you need to think and act fast. Below are some tips to help through the process.
Take Control of the Situation
While the popular saying “out of sight, out of mind” might have applied to the coursework we regularly avoided back in school, it’s not applicable when you’re facing a foreclosure issue. Falling even more behind on your payments will create even worse problems for the owner—problems you’ll have to face and address eventually. Ignoring the situation makes it more difficult to renew your loan, increasing the risk of foreclosure and losing the property.
Contact a lender as soon as you see a problem. The fact is that lenders do not want to go through the inconvenience of a repossession—nobody ever really wants that. They can provide several choices to help borrowers overcome financial difficulties. Being proactive in knowing how to avoid foreclosure is a powerful strategy that can save you a lot of time, money, effort, and, most importantly, your property.
Find a Way to Keep Your Loan Going
Not all situations are hopeless. This is especially true if you have enough money on hand to keep your loan going by following up on any missing payments. You should include principal and interest and fees and other levies. Homeowners are often given a set amount of time under state law to re-establish their mortgages.
Even if your state law does not provide you the ability to reinstate, many mortgages and trust deeds include this provision as part of the arrangement. Most real estate companies often have this in the contract if the local laws do not enable the right to reinstate the property. Furthermore, an increasing number of lenders are unwilling to pursue foreclosure, preferring to work out a solution instead, often offering deals and contracts. You might be able to keep the loan going until the promotion expires. Contact your loan servicer to determine how much time you have to resume your loan.
Look for Repayment Plans and Other Options
In the previous points, you’ve learned about how you can keep your loan going. In most cases, you can be eligible for a repayment plan if you’re in a position where you can still catch up. A repayment plan allows you to catch up on missing payments over time while remaining current on your regular payments. However, the catch for this setup is that your income will have to make both existing and past-due payments. A payback plan might run three, six, or nine months depending on the circumstances.
Avoid Scammers and Frauds
Here’s something that everyone should be wary about and proactive against scammers trying to rip you off. Many malicious people prey on vulnerable homeowners by demanding significant amounts of money, even hundreds of dollars, in exchange for false promises of assistance. No homeowner is obligated to pay anyone other than their lender or bank to help them avoid foreclosure. Plus, there are already systems to offer help when it comes to refinancing or foreclosures. You can get the help you need for free from your servicer or a housing counseling agency with HUD approval.
Dealing with a foreclosure can be a harrowing ordeal, especially if you don’t know what you need to do. Remember that there are many financing options out there and that researching and understanding your situation is the key to getting your property back on track.