If you’re facing potential foreclosure and this is hanging over your head, I know how stressful that can be. The worst thing that you can do though is to bury your head in the sand. Make sure that you open all of the letters from your lender. Read your mortgage documents, and the paperwork that you signed when you closed on the house to learn what the consequences are for not paying. If you’re getting letters warning of foreclosure and missed payments, the lender has not yet foreclosed. You likely still have time to sell the property and save your credit, but you need to act fast!
Work With The Government
Contact your state to learn more about the foreclosure time frame you are dealing with. When you learn the time frame and the different steps of foreclosure and compare that with what letters or other communication from your lender, this will determine how quickly you need to move to secure your exit strategy. The Federal Government’s Housing of Urban Development department has a handful of programs that may offer you a way out of your situation. A lot of these programs are determined by the home’s value versus how much is left on the loan. HUD also has counseling options available to help you understand your financial situation and what options may or may not work for you.
Another way to avoid foreclosure is to simply catch up on the loan payments. You can do this by freeing up personal funds and looking at your budget. Prioritize paying your mortgage over other bills such as credit cards, car payments, etc. Consider taking on a second job to get some extra income. Or simply sell off extra vehicles, furniture, and other high-value, but unnecessary items around your home. You can always re-purchase these things once your financial situation improves. These options are great if you have a temporary hardship and are expecting to be able to make your mortgage payments more successfully in the next few months.
Rent It Out
A creative way to avoid foreclosure is to rent out your house to someone else. Their rent payment now becomes your mortgage and insurance payment. That means you would have to find somewhere else to live that is more affordable and move out. You could also rearrange your house to allow for a roommate to share your house and, depending on the amount of your mortgage payment, they might be able to pay a large portion of it to make it more affordable for you and fit better in your budget. You could have the renter pay 6 months upfront to get you caught up on your mortgage, and then be judicious about your personal spending for the next 6 months to stay caught up. After the 6 months, the renter will resume paying their rent which can help to offset the mortgage payment, often by a lot. On the other hand, renting out your home may lead to additional headaches from your renters and potential damage to your home.
The most simple way to avoid foreclosure is to nip it in the bud with a short sale. There are lots of investors waiting for short sales to come on the market. This is where the bank will negotiate a sale price with a buyer and sells your house short of what is owed on it. Trust us, the bank does not want to own your house. They will usually take an offer that is close to the loan principal, even if the home is worth more than what is left. This makes for a great investment opportunity for buyers with cash on hand.
We would love to work with you so that you can keep some of your hard earned equity rather than have the bank just simply give it away. Give us a call today to discuss all of your options. We’re here to help!