When unfortunate circumstances happen, you might fail to have the means to pay for your mortgage payments. This can leave you facing the risk of having a foreclosure.
Although you can get a home equity loan from reliable lenders to save you from losing your house, it’s best to prevent or stop the foreclosure. That’s because besides losing your home, foreclosures can seriously affect your eligibility for getting credit in the future.
Fortunately, there are things you can do to deal with this problematic situation with ease.
Asking for forbearance is a risk-free way of stopping or slowing down a foreclosure. It’s an agreement between borrowers and lenders that provide borrowers more time to make up for their payments, delaying the foreclosure process. Forbearance means ‘holding back,’ and lenders might agree to wait for the borrower’s due payment before taking any legal action against them for a specified period.
Apply for a Loan Modification
Federal and local state laws prohibit all lenders from continuing home foreclosures when loan modification reviews are processed, slowing down the foreclosure process. A loan modification is when a lender agrees to adjust the terms of a borrower’s loan. These adjustments can include lowering the payment, loan amount, or rate, making the loan more affordable.
You can also participate in making home affordable (MHA) programs to help you avoid foreclosure quickly. It’s a government initiative that provides homeowners different loan modification programs to help find alternative ways out of the mortgage or lower mortgage payments monthly.
Refinancing is when a lender offers a borrower a new loan that features new interest rates and guidelines, helping you cover missed payments you have in the past, plus what you currently owe. However, you can only qualify for this when you have enough equity or meet the lender’s lending terms. Refinancing agreements usually can’t negatively affect your credit, helping you get back on track.
File for Bankruptcy
Filing for bankruptcy is one of the riskier methods you can do to stop foreclosures, but it can prevent your home from getting foreclosed fast. Once a borrower files a bankruptcy petition, debt collectors or mortgage lenders are not allowed to continue any form of collection activity by the federal law. And foreclosure is a form of collection activity, so the day you file for bankruptcy, the foreclosure process will be held.
However, it can only temporarily freeze the foreclosure process, so it’s best to consult a licensed bankruptcy lawyer and see if filing for bankruptcy is the best choice for your specific situation.
Short Sale Your Home
Foreclosure can negatively affect your credit, so if you want to avoid the issues that come with it, it’s best to short sale your home. When you short sale, it can help you earn enough money to make up for what you currently owe your lender. However, before doing this, you will need to get permission for your mortgage lender to prevent costly legal troubles.
Overall, you need to take the right steps fast. You can consult a lawyer to determine the best measures you can do in your situation to help you keep your home and save your credit score.