4 Options to Avoid Foreclosure When You Can’t Make The Payments
Monty Schmidt, Nor Cal REI
Bills flying in, notices on the door, and phone calls from creditors. The foreclosure process is one of the most degrading situations a person can be in.
To the bank, it doesn’t matter what a person is going through. All they know is that they want their money back and they want it fast. That is why many lenders are willing to work something out with the borrower, even if it means reducing the amount they receive.
What can you possibly do in this type of situation?
Here are 4 different ways homeowners in California have used to stopped their foreclosure.
1. Loan Modification
A Loan modifications is when your lender permanently restructures the terms of your loan to make it more affordable for you. This can be in the form of a reduced interest rate, a longer loan term, or a change from a variable to a fixed interest rate.
Unfortunately, not everyone qualifies for a loan mod.
During the application process, the lender will look at a number of things to determine if you are qualified. Like what?
Some of the things a lender will look at include debt-to- income ratio, the hardship letter, and a trial period to confirm that you are able to make the new payments.
2. Repayment Plan
It’s exactly what it sounds like.
Basically, the lender agrees to break up all the past due payments into smaller payments and adds it to your regular monthly payments. Usually a repayment plan works with a loan mod to cure past delinquent payments.
For example, let’s say debtor Debbie has 2 months of missed payments totaling $3000. Debbie gets on a repayment plan and her lender splits the payments in $500 a month on top of her normal mortgage payments for 6 months. After 6 months, her default debt will be paid off and she goes back to the regular monthly payments.
A short sale can be one of the best options for homeowners who have an underwater mortgage (owe more than the house is worth). In a short sale, the bank agrees to sell the house to a buyer of your choice for less than what’s owed on the mortgage.
In most cases, the sale of your house will allow you to walk away from the house without a deficiency… if it is approved by the lender. Yes, your credit will still take a hit.. But not nearly as bad as a foreclosure.
4. Selling a house on the market
Selling the house can pay off the loan and give you money to relocate (if their is equity). In many cases, a lender is willing to postpone a trustee sale if the property is in escrow.
In California, A homeowner has about 5 months to bring the loan current or pay off the loan before the house is sold to the highest bidder (with or without their permission). That’s plenty of time to sell a house, but many people push it off until it’s too late. Why wait? It’s better to sell on your terms and get some money rather than let it go to auction. It would be good to either list it with a realtor or sell to an investor.
Our foreclosure programs
When all else fails and a homeowner runs out of options/time, Nor Cal REI Offers programs to stop a foreclosure. These programs allow a homeowner to sell their home when they are all out of options. For more information click here.