Foreclosure is a process that many homeowners fear, especially in today's economy. There is good news though, there are ways to avoid foreclosure. Here are 7 ways to stop foreclosure.
1. Pay mortgage on time
Make your payments on time. I know it sounds silly but it's not. If you make your mortgage payment you will not be in danger of losing your house.
If you are not able to pay all of your creditors, consider which bills you are going to pay. Your mortgage is attached to your house and if you do not pay your mortgage, the bank can foreclose and take your house. This is not the case with credit cards. Credit cards are unsecured debt, they can file a lien against the house but they can not force a foreclosure.
2. Call the bank and ask for an adjustment in payment
You can contact the bank, your attorney, or you can contact a loan modification company that specializes in working with banks to modify mortgages.
There are a few ways to modify your existing mortgage.
1. The bank may allow you to make up the back payments over time. Many times if the problem that caused you to miss your mortgage payments has been corrected. For example you were fired and now have a new job, the bank may allow you to make up the missed payments over a period of time. This means you will have an additional monthly payment on top of your monthly mortgage payment. For example, if you owe $ 6,000 in missed payments and the bank may allow you to make payments of $ 500 a month over the next 12 months to cure the loan. You then have to make your monthly mortgage payment plus the $ 500 payment, otherwise you will end up back in foreclosure.
2. The bank may put the missed payments on the back-end of the mortgage. Again, if you have corrected the problem that caused you to miss mortgage payments, the bank may put the amount you owed for the missed payments on the back-end of the loan and extend the term of the loan. You will then just need to start making your monthly payments.
3. You can ask the bank to adjust the terms of the loan. Again, if you have corrected the problem that caused you to miss mortgage payments, the bank may change the amount of your monthly payment, adjust your interest rate, or change the amortization (length of time of the loan, for example 15 years to 30 years). For example, if your payment is $ 2000 and month and you can only afford $ 1500 / month, the bank may adjust your monthly payment, lower your interest rate, or change the loan to an interest only payment. You then need to make sure you make your monthly payments on time.
4. The bank may consider combining these items. For example, put the missed payments on the back-end of the loan and lower your monthly payment. This will allow you to make your monthly payments on time. If you are able to get the bank to modify the loan, you must make the payments going forward otherwise you will be back in foreclosure.
3. Increase your income
There are many ways to increase your income. You can ask for a raise at work if you are doing a good job and have a valid reason, such as a high level of productivity. You can get a Second job to bring in more income. Maybe you have room in your house to take in a tenant who pays you rent. You can also consider selling something such as that luxury car, or, large screen TV, motorcycle, boat, etc. Think about what is more important, watching TV every night or keeping your house?
4. Refinance or take out a second mortgage
If you have equity in your home, consider refinancing to get a lower payment and / or pull out some cash to make up the missed payments. Be sure you can make the payments on the new mortgage and afford the closing costs.
If you have equity, consider taking out a second mortgage or a HELOC. Be sure you can make the payments on the second mortgage. Keep in mind that if you pay the first mortgage and do not pay the second, the second mortgage holder can then foreclose.
A Chapter 13 bankruptcy is a "reorganization". You will have to make payments for the bankruptcy and continue to pay all existing payments on time. A Chapter 7 bankruptcy is a forgiveness, but not likely to be approved when you have an asset such as a house.
This is a temporary solution. You must perform according the bankruptcy terms in order to keep your house. If you file bankruptcy and do not make payments to the bank, the bank can be excused from the bankruptcy proceedings and move forward with the foreclosure.
6. Sign a deed-in-lieu of foreclosure, giving the house back to the bank
You can sign the house over to the bank. Then they will not have to go through legal proceedings to foreclose and you will not have a foreclosure on your credit report. You can then move on with your life.
7. Sell your house
If you can not afford the house, consider selling it. You are selling the house because you can not afford the payments. This may be your last resort, other than the house being auctioned at the foreclosure sale and you being kicked out.
If you have equity, list the house below market value to entice buyers. Do not be greedy. Remember the reason you are selling the house is because you can not afford it and the bank will take it away from you leaving you with nothing. It's better to make a little bit of money from the sale than get nothing at foreclosure. If you can sell the house for what you owe, or just above what you owe, you will prevent yourself from going through foreclosure.
If you owe more than the house is worth, list the house for the current value. If you want to be aggressive, list the house just below market value to entice buyers to purchase your house instead of your neighbor's house. The Realtor can contact the bank to request a short sale. A short sales means the bank will accept less than what you owe to satisfy your debt. Be sure to get a letter from the bank voting they will not come after you for the difference. You may also owe income tax on the difference. Why? You borrowed the full amount from the bank and received the funds so the IRS considers it income to you. Also keep in mind, the bank is not obliged to accept a short sale, they are doing so at their discretion.
You can sell through a Realtor. Check with the Realtor to see what the Days on Market is in your area. If the days on market is 120 days and the foreclosure auction is 45 days away, you need to an aggressive Realtor who will do everything they can to sell your house now. You must tell your Realtor when the auction is, they can contact the bank and ask the bank to postpone the auction. Keep in mind, the Realtor works on commission. If there is no equity in the house, many Realtors will not touch it because they want to get paid. You may also consider paying the Realtor out of your pocket so that you can get the house sold.
Another option is to sell your house to an Investor. Investors can be creative and provide a solution that meets your immediate needs. Investors also do not charge a commission that a Realtor does. The Investor is a Buyer and they want to buy your house. Investors can close quickly. If you are a few days away from the auction, many times the investor can close the purchase of the house before the auction or get the auction postponed because they have the house under contract.
Many investors also have other properties available and are willing to work with you to put you in another home that you can afford. They can also help finance you in the new home so you can still own a home and correct your credit.