Five Helpful Tips If You Are Facing Foreclosure
If you are facing foreclosure, it can be a very stressful experience. During uncertain times like right now, many Americans are experiencing financial troubles and foreclosure can be looming in the future for many people. The upside to this scary situation is that you do have some options to avoid foreclosing on your home.
What Is pre-foreclosure and foreclosure?
Pre-foreclosure refers to the early stages of the foreclosure process. If you have missed at least three months worth of mortgage payments, you will receive what is called a Notice of Default. During this time, you still have the opportunity to make up any missed payments. If that is not an option, you can also look into selling the property before it officially goes into foreclosure. This is known as a short sale and your lender does have to agree to you moving forward with it. The key thing to remember during this pre-foreclosure process is that making regular contact with your lender is essential so you know what options are available to you.
Once you have missed a certain number of payments (or you have not met other terms in your mortgage document) the foreclosure process will officially happen. This is where the lender repossesses your property and moves to sell the home so they can recoup whatever money they can from the loan that would otherwise go unpaid. So what can you do to help yourself in all this? Read on.
Below are five strategies to avoid facing foreclosure
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Figure out your finances
If you are facing foreclosure, now is the time to do a full audit of your finances. Look at what money you have coming in and categorize all of your spending. This will give you a clear idea of where you can really cut back and what you truly can afford as a mortgage payment.
Contact your lender
People often don’t think to contact their lender to see what their options are when facing foreclosure. At the end of the day, the lender wants to get paid. Let them know what your current financial struggles are and see if you can negotiate a new payment plan. The lender may be willing to work with you if it means they get assurance of money coming in.
See if you can do a short sale
Doing a short sale is common if you’re facing foreclosure. If you want to try and move forward with one, it will involve contacting your lender and trying to get them to approve a price for your home. If you are able to sell the home for this new price, the lender would still need to forgive your loan even thought its lower than the amount you owe. This may sound like a great option but short sales do come with their own problems. For this reason, your lender may not approve it and it can be a hassle for the buyer to deal with too.
Reach out to HUD
The U.S. Department of Housing and Urban Development sponsors housing counseling agencies around the country so they can provide free or low cost advice to homeowners that are struggling. Specifically, their foreclosure prevention counseling services are free through the HUD’s Housing Counseling Program.
Consider filing for bankruptcy
Although bankruptcy will greatly impact your credit score, it could be a solution to delay facing foreclosure. As soon as you file the paperwork, an “automatic stay” will go into affect which will keep collections at bay and will temporarily stop the foreclosure process.
There is Chapter 7 and Chapter 13 bankruptcy available and which is right for you will depend on your income.
- Chapter 7 clears your debt and a court-appointed trustee will sell off your non-exempt property to help pay back creditors.
- Chapter 13 will allow you to keep your property but you will have to pay back the debt through a repayment plan.
Whichever one you go with will provide you with some time to figure out a plan for staying in your home.
How the CARES Act is helping foreclosures
Under the recent CARES Act, a moratorium on foreclosures has been put into affect for those homeowners that have been economically impacted by COVID-19. A third extension has gone through which will extend the moratorium on foreclosures and evictions for those that have federally backed mortgage loans through December 31, 2020.