Options to Avoid Foreclosure Fall into Two Categories: Keep Your Home or Move Out
You may be facing foreclosure … so what are your options? Look at the situation more from a financial standpoint than an emotional standpoint. This way you can more successfully analyze which option best suits your needs and desires to move toward resolving your financial difficulty. One very important thing to remember: Time is of the essence.
Think through your situation and then make a decision. Take action so you have time to complete the solution you choose. Because, if you don’t do something, the bank surely will. Your options include:
If you do nothing, you most likely will lose the home at foreclosure auction. Loan applications generally ask if the applicant has ever been foreclosed upon. Credit reports also disclose this damaging information. Not the best option.
Completely paying off the entire loan amount plus any default amount and fees. Usually this is accomplished through a refinance of the debt. New debt is at a normally higher interest rate and there may be a prepayment penalty because of the recent default. With this option, there should be equity in the home.
Paying the entire default amount plus interest, attorney fees, late fees, taxes, missed payments and fees.
Utilizing the existing mortgage company to refinance the debt or extend the terms of the loan. This may allow the homeowner to catch up at a more affordable level. To qualify, you must prove to the lender you have fixed the problem that caused the late payment and you have the capability to make the new payment.
Lender may be able to arrange a repayment plan based on the homeowner’s financial situation. The lender may even be able to provide a temporary payment reduction or suspension of payments. Information will be required from the borrower to show the lender you are able to meet the new payment plan requirements.
A loan from the lender for a 2nd loan to include back payments, costs and fees.
Deed in Lieu of Foreclosure
Give the property back to the bank instead of the bank foreclosing. Banks generally require that the home be well-maintained, and all mortgage payments and taxes must be current. Most loan applications ask if this has ever happened. This has about the same impact on your credit as a foreclosure.
This option can liquidate debt and/or allow more time. We can refer you to a qualified attorney.
a. Chapter 7 (Liquidation): To completely settle personal debt.
b. Chapter 13 (Wage Earner Plan): Payments are made toward a plan to pay off debts in 3-5 years.
c. Chapter 11 (Business Reorganization): A business-debt solution.
Sell the Home
If the property has equity (money left after all loans and monetary encumbrances are paid), the homeowner may sell the home without lender approval through a conventional sale. In this case, the homeowner will get cash from the sale. On the other hand, a Short Sale, also known as a pre-foreclosure sale, can be negotiated with your lender by your Real Estate Professional if what is owed is MORE than the property’s value. In these cases, your Real Estate Professional should be a Short Sale Specialist, preferably certified by Short Sale Genius.
There may be more options than those listed above. You should always consult an Attorney and CPA for information specific to your situation.
Need a referral to someone who can help? Call us today at 951-778-9700 or use the form below and we’ll connect you with a trusted professional.
IMPORTANT NOTICE: We are not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
Illustration courtesy of Stuart Miles | freedigitalphotos.net
Alternatives to Foreclosure in California | Short Sale vs Foreclosure | Avoiding Foreclosure in Riverside | Brian Bean and Tim Hardin Dream Big