The Best Way To Avoid Foreclosure In Huntsville, AL – Your Options
What should you do if you have missed mortgage payments and are at risk of foreclosure? If this is a possibility, it’s vital to take action as soon as possible. The first step should be to contact your lender, which will either help establish forbearance on the loan or modify the mortgage terms. Avoiding foreclosure may also require filing for bankruptcy, selling your home, or refinancing with a different mortgage company. In this article, we’ll discuss the pros and cons of each option so that you can make an informed decision about what steps to take next!
You Must Act Fast
The most critical factor in avoiding foreclosure is acting quickly. Not doing so is the most common mistake homeowners in this situation make. And we get it. Addressing this issue is not the most pleasant experience in the world.
However, when you go into denial mode and act like the problem isn’t there, it only festers. Not only does it show your lender that you’re not serious about resolving the issue, but it also provides time for more monthly mortgage payments to pile up. This makes the hole that you’re trying to dig yourself out of even deeper.
No matter which option you choose to pursue to avoid foreclosure, acting as quickly as possible will drastically increase your success rate.
Now, let’s consider your options to stop a foreclosure sale on your home.
Make Up Your Missed Mortgage Payments
Many people wonder, “Will making payments stop foreclosure?” The answer is yes. This is the best and most sure-fire way to stop the foreclosure process in its tracks.
Determine The Amount You Are Behind
To bring your loan current, you will need to contact your mortgage servicer and ask them what your reinstatement fee is. This amount will consist of all of your missed payments along with all interest and late fees incurred.
If you can come up with this amount, your loan will be cured, and everything will be back to normal. We strongly recommend doing whatever it takes to make this happen, even if it means borrowing the funds from friends or family.
Develop A Repayment Plan
Although making up the back payments and bringing your loan is the simplest way to avoid foreclosure, most of the time, it is not the most practical approach. Most people in this situation are doing their best just to keep up with future payments, much less pay a lump sum in addition to that.
A slight alternative approach to this solution would be to develop a repayment plan with your loan servicer. A payment plan will allow you to spread the amount required to bring your loan current over some time instead of paying it all at once. This will slightly raise your monthly payment, but the longer your lender will allow you to spread it over, the less of an effect it will have.
Repayment Plan Keys For Success
To increase your chances of getting a repayment plan approved, you should begin communication with your mortgage lender as soon as possible. The more you fall behind, the tougher case you will have. If they see that you are doing everything in your ability to fix the situation, they will be much more likely to work with you.
And remember, banks do not want to go to a foreclosure auction because there is a chance that no one will buy the house, and they will have to take it back. If you can work with them to prevent that, everyone will be happy.
Request A Loan Forbearance
Since the Covid-19 pandemic, mortgage loan forbearance has become a trendy topic. However, this program was around well before the last couple of years.
What Is A Loan Forbearance?
A forbearance is an agreement between you and your mortgage servicer that temporarily reduces or suspends your mortgage payment for a set period. Part of the agreement is that the lender agrees not to start a foreclosure during the forbearance period.
If you are facing a temporary financial hardship, such as being in between jobs or a medical emergency, you can request forbearance and use that time to get back on your feet.
Thoughts To Consider About Forbearance
- Forbearance is not a long-term solution. These programs are designed to provide temporary mortgage relief during short-term financial issues. If an improvement in your finances is not in the foreseeable future, you will likely need to seek another option to stop foreclosure.
- The payments that you miss are not forgiven. You will need to have a thorough conversation with your lender to make sure you know what the repayment requirements will be.
- Although payments are suspended with many forbearance programs, interest will continue to accrue. Make sure to discuss this with your mortgage company as well.
Work Out A Loan Modification
If your mortgage payment has become too much of a burden for you, a loan modification may be a viable option. This program is an agreement between you and your bank that modifies the terms of your mortgage loan to reduce your monthly payments. This may involve lowering the interest rate, converting an adjustable-rate mortgage to a fixed-rate loan, or extending the loan term.
Getting Approved For A Loan Modification
To get a loan modification approved, you must contact your lender and ask if this is something they offer. As always, the sooner you contact them, the better. If you allow multiple mortgage payments to pile up, they will doubt that you are very serious about avoiding foreclosure.
For your mortgage servicer to approve your loan modification, they will need to see details about your financial hardship and that you cannot make your monthly payments. They will also need to verify that you will be able to afford the new payment amount after it is lowered. They will likely ask to see a personal finance statement, proof of income, tax returns, bank statements, and a written hardship letter.
Refinance Your Home
If your lender will not allow you to modify your current loan, a similar option would be to refinance and start a brand new loan. If you have paid down a portion of your original loan, refinancing will allow you to stretch your remaining debt over a longer term, thereby reducing your monthly payments. It is also possible that interest rates now are lower than when you bought your home. If that’s the case, this will give you additional savings.
Getting Your Refinance Loan Approved
To refinance your home, you will need to fill out a mortgage application just like when you bought your home. Since your new mortgage lender will be checking your credit score as part of the underwriting process, it is best if you begin refinancing as soon as you feel the pressure to miss payments, since missed payments will harm your credit report.
Deed In Lieu Of Foreclosure
A deed in lieu of foreclosure is when you deed your home back to your lender with the agreement that they will not foreclose. A foreclosure is a costly and stressful process for everyone involved, including the bank. They may be open to a deed in lieu of foreclosure if it allows them to fast-forward and skip the headaches.
Impact On Your Credit
A deed in lieu of foreclosure will show up on your credit report, but it will not have quite an impact as a foreclosure. If no other options presented in this article work for you, this may be the best route to take.
Another point to consider is that if you owe more than your house is worth, your bank might require you to pay the difference for them to accept this option. Even if the lender forgives that deficiency, there is a chance you will have to pay taxes on that amount.
File For Bankruptcy
Bankruptcy is a way for people in large amounts of debt to develop a plan to repay them. Chapter 13 bankruptcy can be viewed as a long-term repayment plan for all of your debts. In many cases, filing for bankruptcy can pause the foreclosure process if an automatic stay is implemented. This will provide temporary relief from creditors and debt collectors. However, with this type of bankruptcy, future mortgage payments will still be required to be paid on time.
It cannot be overstated that bankruptcy is a highly complicated process with many challenges and pitfalls. If this is a route you are considering, you must seek legal advice from a bankruptcy attorney. Only someone specializing in these programs can give you the expert advice you need to navigate such complex territory.
Impact Of Bankruptcy On Your Credit
Another point to consider is that bankruptcy will dramatically impact your credit score. If you are searching for the foreclosure prevention option with the smallest impact on your credit, bankruptcy probably isn’t for you.
Sell Your House To Avoid Foreclosure
Aside from simply making up your missed payments, selling your home is the cleanest way to avoid foreclosure and keep your credit intact. Many people often wonder, “Can I sell my home during foreclosure?” The answer is yes, especially if you have some equity and can sell it for more than what you owe your lender. If you owe more than the house is worth, that would be considered a short sale. It’s still possible, and this option is much better than your bank continuing with foreclosure proceedings.
Forget the stress of getting your house list-ready and putting it on the market. If you’re behind on your mortgage payment, you need answers fast!
Look No Further…
We’re professional house buyers in Huntsville AL, and we will buy your house fast and completely hassle-free so you can save your credit and move on! Don’t worry about making repairs or cleaning. We purchase properties with the intent of fixing them up. Leave all of those headaches to us.
Even if you just need to talk about all of your foreclosure prevention options, we’d love to hear from you. If we can steer you in the right direction to restore your finances, we consider that a success.
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