You have options if you are facing foreclosure. Investigate these options to protect your credit rating and financial future.
The word foreclosure is frightening for homeowners who are having difficulty paying their mortgage. You may not be able to afford your mortgage payments if your financial situation has changed since you purchased your home. Although the thought of foreclosure may be scary, there are ways to get back on track. We will discuss what happens during a foreclosure, and how to minimize the financial damage.
What is foreclosure
A foreclosure occurs when you default on your mortgage payment. Your lender can recover the debt by selling and repossessing your property. What is a foreclosure? You can expect to see the following phases in a foreclosure, although the process may vary from state to state.
1. Default Your lender may contact you via phone if you stop paying. Your lender will send you a letter if you have been in default for more than three months. This is an alert to get your payments current within 30 days.
2. Notices of Default : Your lender will send a notice to default if you are 90 days or more past due. The lender will give you 30 days to settle your debts before foreclosure begins.
3. Foreclosure Start: Depending upon your state, a lender can initiate a foreclosure through a legal process or non-judicially. You still have 30 to 120 days to pay before your home is auctioned.
4. Sale Your property will be auctioned to the highest bidder after your lender has provided a notice of sales.
5. Eviction : You will need to leave the property after the auction, whether the bank sells the house to a buyer or keeps it.
Avoid foreclosure with these options
Your unique situation will determine the best option for you. You should also consider your equity and cash reserves, as well as the time that you’ve spent in default. The options you have will be impacted by these factors. If you are in foreclosure you may want to consider the following options instead.
Speak to your lender
You may be able to negotiate with your lender to lower your monthly payment. It’s especially important if you are still in the early stages of foreclosure. Ask the lender to modify your loan terms based on your honest financial situation. Try it!
You might be able to get a lower rate of interest, extend your repayment term, or change the structure of your loan. All these things could make it easier for you to pay a monthly amount that is more affordable. A loan modification differs from a refinance, which involves a closing.
Refinance
In the last few years, equity in homes has skyrocketed because of major appreciation. You may be able refinance your mortgage if you have 20% or more equity in your home. The refinancing process replaces your current mortgage with a brand new one, which may have a lower rate of interest and/or different terms or structures.
Closing costs will be incurred if you extend the term or lower the interest rate. You can avoid paying the closing costs upfront if you are short on cash. However, this will require you to pay a higher interest rate over time. Use a calculator before selling to make sure you break even.
Request forbearance
You can ask your lender for forbearance if you are experiencing financial difficulties. It’s important to remember that you will eventually have to repay your debt with interest.
Millions of homeowners have received forbearance because of financial hardships related to Covid since the outbreak of the pandemic. You may be eligible for additional forbearance if you have a Fannie Mae or Freddie Mac mortgage, or a HUD/VA/USDA mortgage, and you’ve entered into a forbearance agreement by the deadline.
It’s still worth talking to your lender to explain your situation, even if you don’t have a federally-backed loan or your hardship doesn’t relate to Covid. Your lender may work with you if you are experiencing a family emergency, medical problem, or job loss.
Short sale: how to do it
You must have your lender sign an agreement before you can execute a Short Sale. This transaction involves selling your home for a lower price than what you owe. If the lender does not forgive the difference, then you can ask them to release you of your obligation to pay it. In either case, you may have to pay income taxes on the forgiven amount. Talk to your CPA about this.
Sign a deed instead of foreclosure
If you can, avoid foreclosure. It can lower your credit score more than 100 points. And it can affect your borrowing for 7 years. You can transfer the title to the lender if you do not have any outstanding loans. You may also want to ask the lender to release you from any remaining balance. You should get the agreement in writing.
Ask for help
You can seek help from a housing counsellor if you feel overwhelmed. The counselor will review your financial situation to help you make an informed decision. You may also be eligible for financial assistance from your local or state government. If your hardship is due to Covid-19 you may qualify for money from the Homeowners Assistance Fund.
Sundae can help you sell your home quickly
A fast cash sale allows you to pay your lender back and avoid foreclosure if your home is worth less than what you owe. You might even walk away with a little pocket money. Sundae allows you to close your business in just ten days. In certain locations, you can get a cash loan of up to $10 000 to tide you over. This could be used to help cover relocation costs.
Sundae differs from iBuyer. You won’t need to worry about hidden costs cutting into your profit. Sundae will not charge you any additional fees. Instead, the process is simple and straightforward. We will list your property on our marketplace, and we’ll market it to thousands investors so that you can receive multiple offers. You can get a fair price for your home without having to spend any money on repairs.