Foreclosure is a legal process that permits a lender to take possession of and sell your home if you default on your mortgage payments.
The foreclosure process usually starts when a lender sends a notice of intent to foreclose to a homeowner. This notice gives you a set period of time to bring your mortgage current, which if you're unable to do, the lender can proceed with their plan to seize and sell your home.
The thought of losing your home can be extremely distressing, but sitting back and waiting for foreclosure is not your only option. Financial setbacks can happen to anyone — and if you're struggling to keep up with your mortgage payments, there are proactive steps you can take to avoid foreclosure and keep your home, which we'll discuss in this post.
3 Proven Ways for Avoiding Foreclosure
Some of the most common strategies used by homeowners to prevent foreclosure include:
Reinstating the Mortgage
Your lender will not initiate foreclosure proceedings after you miss one mortgage payment.
In most cases, they'll send you a notice of intention to foreclose after three months of missed mortgage payments. On receiving the notification, you'll have about 30 days to pay the entire amount in default or negotiate a plan for repayment with your mortgage lender.
So, generally speaking, you have four months before you face the serious threat of losing your home to foreclosure.
If you're only a few payments behind, you can use this time to accumulate enough money to reinstate your mortgage by paying the past due amount plus any interest or penalties.
If your business is experiencing a slump, for example, try taking up a part-time job or freelancing to supplement your income until you can get back on track with your mortgage payments.
Other options for raising the funds needed to reinstate your mortgage include assessing your financial situation and identifying areas where you may cut back on spending, as well as selling an asset.
Note because many lenders are reluctant to pursue foreclosure, they may be willing to let you reinstate your mortgage up until your home sells. To know how much time you have to reinstate, talk to your mortgage provider.
Working With a Lender to Avoid Foreclosure
If you lose a job, experience a medical emergency, make a bad investment, etc., and you find yourself struggling to make mortgage payments, don't ignore your lender's calls or letters.
Talk to them as soon as you realize you're in financial trouble, and they'll likely be happy to discuss solutions that can help you save your home from foreclosure.
The lender may be willing to consider the following options:
If you've missed several mortgage payments and can now resume making consistent monthly payments, you and your lender can work out a repayment plan to help you catch up on your mortgage.
For example, you may add the amount owed to your next mortgage installments, allowing you to pay off the arrears over a few months.
Forbearance is a short-term agreement with your lender that allows you to halt or lower your mortgage payments for a specific period. This option is especially helpful if you're experiencing a brief financial pinch as a result of a job loss or illness.
At the peak of the Covid-19 pandemic, millions of U.S. homeowners in financial distress entered into forbearance arrangements for up to 18 months.
While forbearance might ease the pressure of sorting out your mortgage and provide you with much-needed time to deal with your financial challenges, you should be aware that once the forbearance term expires, you'll be required to pay missed payments in a lump sum or through a repayment plan.
Mortgage Loan Modification
If you don't see your financial situation improving in the near future, your lender may agree to a mortgage loan modification, which involves making permanent changes to the terms of your mortgage, including lowering the interest rate, extending the loan term, and converting an adjustable-rate mortgage to a fixed-rate mortgage.
The sole purpose of this facility is to make it possible for you to afford your mortgage again by lowering your monthly payments through the mortgage changes.
So, you may need to demonstrate to your lender that you'll not have a problem repaying the adjusted loan for them to grant you a loan modification.
There are many other ways you can avoid foreclosure by working with your lender, including refinancing your mortgage at a lower interest rate to keep your mortgage payments affordable and deed in lieu of foreclosure, which involves voluntarily transferring your home to a lender in exchange for a debt pardon.
Selling Your Home
Foreclosures are factored into your credit score, and they can make it impossible to obtain a mortgage to purchase another house for up to 8 years.
So, while selling your home can be emotionally draining, it may be the best option to avoid foreclosure and protect your credit score.
The ideal time to put your home on the market is soon after you realize your mortgage payments are too high. At this point, you may be able to sell your house fast, settle your mortgage, and walk away with some profit.
However, if you're already in foreclosure, you still have a chance to sell your home up until the property is sold at the foreclosure auction.
If you decide to sell your home, work with an experienced real estate agent in your area who can assist you in selling your house fast and at a reasonable price.
You can also opt to sell your house for cash to a home-buying company. These firms frequently buy houses "as is," allowing you to sell your property in a matter of days without the need for repairs or renovations.
HomeBuyers of Pittsburgh: The #1 Professional Home Buyer
If you're having trouble making your mortgage payments and the state of your finances isn't improving, contact HomeBuyers of Pittsburgh at 412-444-8914 or info [@] urbanpgh.com.
We are a professional home buyer in Pittsburgh that can offer you an effortless home sale option that puts cash in your pocket quickly, letting you clear your mortgage obligation and have money to help you weather the financial storm you're in.
Contact us today to learn more about how we can assist you, like we have many others, in avoiding foreclosure and damaging your credit with a quick property sale!