The thought of going into foreclosure can scare even the strongest of people. However, if a Notice of Delinquency appears in the mail, it does not mean that you will lose your home. There are certain things that you can do to slow down or even avoid the process altogether. Learn more about what you can do to stay in the best financial shape.
What Is Foreclosure?
As you must already know, when you sign a mortgage, you are legally bound to pay back the lender the entire amount according to the terms agreed upon. But, if you stop making payments as set out by the contract, you end up breaching that breach. It results in the lender having the right to take the property from you to recoup the amount lent. The repossession process is called foreclosure.
Now, if you missed out your mortgage payment by a few days, it is important that you quit stressing. The bank does not come for the property immediately. A grace period of 15 days is offered by most lending institutions. You might just need to pay a late fee.
Foreclosure proceedings only begin when you have not paid the mortgage for about 3 months. It is from there that the process takes around 2 to 12 months to complete, depending on your location. As the process is lengthy and takes a long time, you have an opportunity to make changes in order to retain your property. The following tips will help ensure that you do not have to move out.
- Educate Yourself
One of the most important tips that you need to consider to avoid foreclosure on your house is educating yourself. It all starts with educating yourself about the foreclosure process. Begin with a deep breath and read your way through all your options. Most initial late payment notices contain important information about foreclosure prevention options. It is only later on that you will receive mail that consists of notices informing you about the pending legal action and foreclosure process. Regardless of what the notice might say, it is best to get informed.
Now, you also need to learn about how foreclosure is dealt with in your state of residence. In certain states, lenders are required to file a lawsuit to move forward. These states are known as judicial foreclosure states. As for non-judicial states, there is no such requirement. Find out about which type of state you reside in as it will allow you to determine the best solution.
- Contact Your Lender
Once you have received the letter, you must get in touch with the lender immediately. Since foreclosure is costly and very time-consuming, most lenders will prefer to work with you to come up with a resolution instead of repossessing the property. A willingness to work with the lender and honest communication will go a long way in getting things sorted. The lender might offer you the following options.
- Refinancing: The lender would provide you with a new loan. It would be based on new terms and interest rates to ensure that missed payments and whatever you owe is covered. It does not adversely affect your credit rating and might lead to lower payments.
- Repayment Plan: In such a situation, the lender and you would come up with a plan that suits your budgets to ensure that you stay on top of your payments. You will work to make the payments and catch up on those late payments.
- Forbearance: If the lender offers a forbearance period, your mortgage payments would be temporarily suspended for a certain period of time by the mortgage company. The deferred payments would need to be paid towards the end of the loan.
- Loan Modification: As the name of the option suggests, the mortgage company would change the existing terms including the length, interest rate, and amount due to make monthly payments easy to manage.
- Consult an HUD-Approved Housing Counsellor
If you have contacted the lender and require help with figuring out the way forward, it might be a good idea to consult with an HUD-approved counsellor. These federally funded agencies work with lenders to work out an affordable repayment plan. If you are struggling making payments, the counsellor will help you find the best solution to the problem.
Keep in mind that not every foreclosure assistance agency is the same. There may be some that are a scam and are looking to benefit from your difficult situation. This is why you have to find a federally-approved agency that works for free and has a track record of helping homeowners.
- Consider Filing for Bankruptcy
Another option that you might need to consider is filing for bankruptcy. Although filing for bankruptcy adversely affects credit rating, it could help delay foreclosure and reduce or even eliminate the debt. When you file for bankruptcy, an automatic stay would be imposed on all of your assets. This would halt the foreclosure process temporarily. Learn more about bankruptcy to determine which type of bankruptcy to file for. Once you have filed for bankruptcy, you will have time to decide the way forward.
- Consider a Quick Sale
Finally, if you are frustrated and do not think that you would be able to repay the mortgage or repayment plan, a short sale might be the perfect option for you. However, you need to ask the lender for permission to proceed. You will end up losing your home in this situation. But, it will provide you with much-needed peace of mind. Besides, it will allow you to take care of things without having a foreclosure altogether or any of its repercussions on the record. If you live in Salt Lake City and want to sell your home fast, we buy houses Salt Lake City.
Once you have finished reading this post, you will know the best tips for avoiding foreclosure on your house. Always remember that there is an option for everyone. Hence, take a deep breath and let things take their course.