Can You Stop a Foreclosure Once It Has Started
Buying a house that you have worked hard on, and saved money for, is probably one of the satisfying achievements a person could get. Your responsibility as the homeowner is to pay whatever’s due and make sure that you pay on time. But what happens when you miss a payment? Then, you miss another payment, and another payment. Soon, it all piles up and you can’t catch up with your dues. What do you do then? Worse-case scenario is that your house will be repossessed by the bank and foreclosed it! Don’t take that situation lightly, it’s a big problem! But how severe is foreclosure? How can you stop it?
What Is Foreclosure?
The word foreclosure in real estate can be defined as: The legal process where a lender (usually the bank) can acquire or repossess a house and sell it so they can recover the debt owed. The lender has the right to take it once you fall short or refuse to pay your monthly loan payments. This will then start the process of foreclosure. Keep in mind, if you have missed three mortgage payments, you will be given a notice of default or NOD, but you really don’t want to receive any of those, do you?
Can You Still Stop It?
Of course you can stop foreclosure! Usually, you have a few options to take while it is still in the pre-foreclosure period. This way, you can avoid losing the house you have worked so hard for. So, what exactly do you need to do? Here are some tips for you to follow:
Working out a compromise – Basically, what you need is to make a foreclosure workout. This means, your lender should give you a period where you can get back on track on your mortgage payments rather than taking it as a foreclosure. If you can keep up and pay what you owe, then they won’t take your house.
House Counseling – When you are in pre-foreclosure, you must contact a home counseling agency approved by the HUD or Department of Housing and Urban Development. There are counselors in these agencies that could help you with the foreclosure process. They will then contact the lender and offer a repayment plan or solution that could help your situation. Most of the time, these agencies don’t charge you any fees, so you might as well connect with one and see what they can do to help you out.
Short Sale – This is the time after the lender or bank files for a notice of default. Say a buyer offers to buy your house, this offer should be considered by your buyer because once your lender forecloses your house, they will just to resell it. However, if the offer is reasonable, present them a short sale. They will see this as time saved for them and lesser effort to find a buyer. So, if your lender puts your house in the market, make sure to look for buyers even after it’s been foreclosed.
File for bankruptcy – This will definitely stop the foreclosure process in its tracks. The bankruptcy petition will stop any debt collectors, which includes your lender; preventing them from any collecting activity. So, this means that your lender cannot do anything and your foreclosure will be frozen once your lender is notified. However, there’s a catch. The petition is just a mediator between you and the lender. In short, it will just buy you more time to replace or recover from your temporary financial instability, but don’t be too confident. This will not let you off the hook yet. You must have a reasonable payment plan to offer your creditors so you can get back on track. Make sure to consult with a good lawyer if this is the path you would like to take and if this is a good strategy to use.
Have your house on lease-option or assumption – You can ask your lender if they can modify your loan. They will assess your new buyer’s credentials and qualifications if they can assume or take over your payments. If they prove this, it’s a win-win scenario. You can even ask for a down payment from your new buyer so you can pay your overdue bills in mortgages. Keep in mind, that in this case, your new buyer becomes your tenant yet you still continue owning the house until the buyer can save enough money to pay off everything. Make sure you negotiate the lease payments too so your mortgage is covered. A good lease agreement can even help you pay your insurance and property taxes, so make sure you got everything covered with this type of arrangement. Doing this can help you with your foreclosure.
Have a Deed in Lieu – This deed allows the owner to sign and voluntarily return the house to the bank. Sounds good right? It will stop the bank or lender from foreclosing your house, but this will also affect your credit score. Lenders are not thrilled with this case as they fear that the homeowner will file for a case against them claiming that they don’t know what is going on and plenty of other reasons. You can’t really blame the lender though, there are plenty of cases showing that homeowners are faking their financial decline so they can avoid the foreclosure. However, if this is really your case, you can always do this to stop lenders from taking your house.
Sometimes we cannot avoid missing our mortgage payments. This is true when we face certain emergencies and we have to end up using the money intended for our mortgages. However, if you keep missing payments, then it is a sure ball that the bank or your lender will take your house for foreclosure. So, while you can freeze or stop this process, make sure that you do everything you can to make your payments on time. Find an extra job if you have to, create a side business, save money, and make sure it is intended for your mortgage payments. In short, you can avoid foreclosure! You can pay your dues. You can and you will! It’s just a matter of mindset and determination. Give it a try and you will see that we’re right, good luck!