How to Avoid Foreclosure
Foreclosure is a legal proceeding that could lead to the loss of your home. If you miss more than three mortgage payments or your mortgage lender files a Notice of Default, you might have fears that the loss of your home is inevitable. However, just because the lender files the foreclosure does not mean that they will automatically win. Several strategies can help you to stop the foreclosure process, keep your home longer and save your property outright.
Work with your mortgage lender
As weird as it seems, reaching out to your lender when you feel you at risk of missing a few monthly payments and consequentially a foreclosure is an effective strategy. It is usually in the mortgage’s lender interest not to file a foreclosure due to high costs involved. A dialogue between you and your bank would help you explore several options and solutions. Modifying the loan, for instance, is some solution that the lender is willing to negotiate. A loan modification would involve an extension of the amortization period and change the interest rates. You could also ask for forbearance from the lender so as to stall the foreclosure. A forbearance will allow you to partial or no mortgage payments for an agreed period.
Filing for a Bankruptcy
Although filing for bankruptcy is not a permanent solution, it can stop the foreclosure process temporarily. There are two ways to file for bankruptcy, under Chapter 13 or Chapter 7. It all depends on your objective; if you want to keep your property Chapter 13 is most suitable, and if you need to stall the foreclosure by buying some time, Chapter 7 is the way to go. Chapter 13 of bankruptcy facilitates the restructuring of your debts. A repayment plan is designed to help you pay some in part other full for 3-5 years. On the other hand, Chapter 7 of bankruptcy will ensure a delay of the foreclosure proceedings.
Assumption and lease option
Under this strategy, a mortgage borrower can look for a new home tenant/buyer. The buyer then covers most or all of the mortgage payments enough to still pay to live elsewhere.
Deed in Lieu
The homeowner avoiding foreclosure signs this deed to hand over his/her home to the lender. The lender is usually reluctant to take the property back due to fears of future litigation with allegations of misunderstandings. Allowing the foreclosure to proceed is one way you can ensure the lender that you are not faking financial distress.
Sell the property
In cases where the owner has no other option than selling the property can be an excellent choice. Selling the property does not only preserve one equity but also what the remainder of one’s financial score. You end up being in a better financial position that can let you purchase another house in the future.
The best option
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