Don’t worry if you’re a couple of days late making a payment. Most lenders give you a grace period of about 15 days before start adding on late fees. But if you haven’t made your payments in 90 days, then you can expect the lender to begin the foreclosure proceedings against you. The good news is that foreclosures take up to 12 months before they’re completed. Meanwhile, you have plenty of time to fight the foreclosure and retain possession of your home.
Below are the top 5 ways to fight against foreclosure and slow the process down:
1) Get Educated
Learn about your foreclosure and why it is occurring in the first place. Read all the documents which your lender sends you in the mail, especially the mortgage documents. Your first late payment notices should include details on how to prevent foreclosure. If you don’t exercise these options, future mailings will come which discuss the foreclosure process further and the legal actions that will take place if you continue not to fulfill your financial obligations.
Another thing that you’ll want to learn about is the way in which your state handles foreclosures. For example, judicial foreclosure states require the lender to sue the homeowner first and then proceed with the foreclosure afterwards. As for non-judicial foreclosure states, lenders can proceed with the foreclosure without suing first. So, you need to research which of these your state falls under.
2) Contact Your Bank or Lender
Don’t just keep reading your lender’s notices from the mail. Call up your lender and discuss the situation with them. Remember that lenders do not like foreclosures anymore than you do. They cost them time and money, just the same. That is why you can probably negotiate and work with your lender to come up with a suitable solution if you’re facing hard times. Honesty is the best way to communicate with a lender so that they can compromise in the fairest way possible.
When you cannot make your payments on time, your lender will likely present you with these 4 options:
Refinancing – Your lender may be willing to give you a new mortgage agreement where you have new payment terms and interest rates. These terms will cover the payments you already missed in addition to the total owed on the mortgage. Your credit can literally be saved because there is no negative effect on it. Best of all, your monthly payments are lowered too.
Plan to Repay – When your budget can no longer afford the current monthly payments, you can create a new repayment plan with the lender. It takes all the payments you missed in the past and spreads them out over a certain time period in the future. In other words, portions of the past payments owed will get added onto the future payments.
Forbearance – If you’re lucky, the lender will agree to suspend your payment obligations temporarily. This arrangement is called forbearance, but it only lasts for a limited time period. All the payments that were temporarily suspended get added onto the loan once your payment obligations are reinstated.
Loan Modification – The lender may agree to alter the terms of your mortgage loan to help you out more. They might agree to change the payment amount each month, the interest rate, and the number of payments.
3) Talk to a Housing Counselor That is Approved by HUD
If you’re not getting anywhere with the lender, you can try talking to a housing counselor that is approved by HUD. Each state has agencies funded by the federal government which work with lenders to help stressed homeowners come up with a more affordable payment plan for them. The housing counselor checks out the person’s situation to determine what kind of help they need.
Please note: There are scammers out there who’ll overcharge you for their so-called services. An agency that is approved by the federal government should be free for you to use. Never give out personal financial information until you know the agency is legitimate.
4) File Bankruptcy
When you see no reasonable way to stop the foreclosure process from continuing, you can always file for bankruptcy. This will hurt your credit score, but it could delay the foreclosure process for a long time. Not only that, but it could give you the chance to get rid of your debt completely. Filing for bankruptcy immediately imposes an automatic stay on your belongings and assets. This stops the foreclosure process for a small amount of time.
You can file for either Chapter 13 or Chapter 7 bankruptcy, depending on the amount of income you’re receiving. If you file for Chapter 7, your debt is eliminated. However, a trustee is appointed by the court to sell your non-exempt properties in order to compensate your creditors. If you file for Chapter 13, your property stays with you. But the catch is that your debt still exists. You’ll either need to set up a repayment plan or pay it all back if you can.
5) Short Sale
If repaying your monthly payments is likely not going to happen in the foreseeable future, then a short sale could be your last hope. You must ask your lender permission first because they’ll need to agree to take a smaller price for the home. The lender has a say whether this option is chosen or not. Short sales might not make you money, but they’ll prevent foreclosure and save your credit.
Selling to a Real Estate Investor
Another way out of foreclosure is to sell your home to a real estate investor. If you can do this before the foreclosure process is complete, you’ll be able to pay back your lender and ultimately save your credit report. However, do not expect to make as much money by selling to a real estate investor because they typically only offer a discounted price. But if you see no other way out of your situation, then you’ll gladly accept some money for your home versus no money at all.
Real estate investors are in the business of purchasing homes for low prices and then flipping them for a profit. In many cases, they are purchasing homes which need repairs or renovations done to them. The investors will make the necessary repairs or renovations after purchasing the home so that they can make it marketable at a higher value.
Now, why do homeowners sell to investors for less money? Well, there are a couple of reasons for this. First, it is much quicker to sell your home to a real estate investor because there is no marketing or waiting period. You don’t need to contact a realtor and list your property for 12 months before you find a buyer. There is no showing property or answering questions of several different potential buyers. Instead, you can sell to an investor who’ll pay cash for your home within a week.
Closings happen much faster when selling to an investor. They don’t need to wait for months to do lengthy inspections and repair work. Although an investor does one inspection before they purchase a house, all the repair work is done after they purchase it for a lower price. Homeowners are not expected to make any repairs for the investor. Therefore, you won’t be required to spend money on repairs before you sell your home. The real estate investor is happy to purchase your home in as-is condition.
The kind of homeowners who turn to real estate investors is those who must get away quickly. You could be in such a tough financial situation where waiting months to sell your home is no longer an option. After all, the longer you retain ownership of your property, the longer you’ll be responsible for the taxes, HOA, utilities, and other related expenses of it. Even if you lose money on the value of your home by selling to an investor, it could still be better than having to pay all these expenses each month.
You really need to weigh the pros and cons of selling to an investor versus keeping the house and selling the traditional way with a realtor. If you’re facing foreclosure and the bank is just about ready to take over ownership of your property, then you better sell to a real estate investor soon or else you’ll have no home left to sell. Then all the money of your initial investment into the home will be lost forever. Isn’t it better to at least get some money back for your home rather than none?
For this reason, selling to a real estate investor is the only logical decision for any homeowner facing foreclosure without any other way out of it.