Life happens, and sometimes your finances can take a huge hit when it does. Once you’ve missed a few mortgage payments and receive that foreclosure notice, you may feel like you have no options left, but there are. Here are five ways you may be able to stop the foreclosure process.
All this means is working out some form of a compromise that allows you get back on track towards paying what you owe. Options your mortgage lender may consider include:
- Forbearance – In this scenario, lenders agree to wait on taking legal action until a repayment plan has been worked out.
- Repayment plan – With this option, lenders agree to breaking down missed payments and adding them to upcoming ones for a period of time so you can catch up.
- Note modification – A lender could agree to modifying the loan it is adjustable (i.e. – changing or freezing interest rates, extending amortization period).
- Refinance – If you have enough equity and meet the lender’s guidelines, they might agree to increase the balance of your loan to include back payments.
- Partial claim – Depending on the loan, there may be a provision that lets you apply for another loan to pay back missed payments.
- Debt forgiveness – Your lender may give you a break and work out an agreement that gets you current on your payments without having to make up the ones you missed. It rarely happens, and is typically only 1-2 payments when it does.
- Sell as is – If you don’t have time to fix your house and sell it, Home investor companies can buy your house for cash before the house is foreclosed.
This option is available from the moment you start falling behind on payments until the lender sets up an auction, but it is better to act sooner rather than later.
If you can get an offer from a buyer in the period of time between your lender giving you a Notice of Default and setting up an auction, they will have to consider it. Since the lender will have to turn around and resell it anyway, they might agree to a reasonable short sale offer from a qualified buyer in order to avoid the hassle. Just be sure to make your best pitch.
This option allows you to voluntarily sign the deed to your house back to your lender. However, lenders are generally reluctant to agree to this solution. In order to get your lender to consider this option, the following conditions apply:
- You have not been able to sell the house after having it on the market for several months.
- There are few or no junior loans and liens (home equity lines of credit/additional mortgages) to be paid off.
- You can clearly demonstrate your financial hardship.
- You initiate the process and document it as a voluntary action on your part.
Even if you meet all of the conditions, there is no guarantee your lender will agree to this. Additionally, you need to watch for certain provisions in the agreement that allow them to seek a deficiency judgment against you later on.
Under this option, you would need to find a buyer who is willing to assume your mortgage and talk to your lender about modifying the loan to allow that buyer to take over.
There are two possible scenarios under which this can take place. The first is where the mortgage is transferred to the new buyer. The second is the lease option, where the buyer becomes your tenant and you continue to own the property until they fulfill any obligations set in contract and decide to exercise their option to buy.
If you are in severe financial distress, you may need to take this route in order to stave off foreclosure. It will stop your lender from proceeding with foreclosure actions. However, you will still have to work out repayment options with your mortgage lender as well as your other creditors in order to get back on track.
Is your house is in foreclosure (or in danger of it)? Are you considering selling it? We would love to talk to you about how we can help. Just contact us today!
When selling a home in Houston, you have many options to choose from. You could go through a realtor, sell your home on land contract or even become a landlord. If you are looking to sell quickly, however, and do not want to make repairs to your home, consider contacting us. We will buy your home “as is,” pay cash and close quickly.