Learning how to stop foreclosure and implementing the necessary steps is doable if you focus on it hundred percent. As we know, people can find themselves getting behind on their mortgage payments for all sorts of different reasons. It could be that someone in the family has been laid off from work so there is not as much money coming into the household.
Other reasons could include a medical emergency, a death of a loved one or their hours being cut at work. The financial crises could also be caused by expensive home or car repairs that were not expected or by the interest rate going up on the adjustable rate mortgage (ARM).
When you start to experience financial problems, you need to stay focused on the importance of your mortgage and start learning how to stop a foreclosure properly and as soon as humanly possible.
Not responding to the calls and letters from your lender is not going to prevent foreclosure from happening to your home. The lender is only going to let you go on so long without paying your mortgage before they start foreclosure proceedings so you should not hesitate to act.
How to stop foreclosure before it gets serious
The first step the lender takes in the foreclosure process is sending out a notice of default, which is to protect themselves. You need to do something to prevent foreclosure before you get one of those legal notices.
- You should talk to your lender as soon as you get behind in payments and see if they will work with you to avoid a foreclosure process.
- You may be able to work out a plan to pay the past due amount and stop foreclosure before it starts. Sometimes, but not very often, a lender will forgive a certain amount of your past due amount and let you start fresh with your payments.
- Another option to consider is asking them to let you pay the past due amount over a period of several months instead of all at once.
- Your lender could also possibly rework your mortgage so your payments are closer to what you can actually pay.
- Your lender can also add the past due balance to the back of your mortgage so you will pay it eventually or they could give you a separate loan for the past due amount so you can start fresh with your mortgage payments.
Learning how to avoid foreclosure means examining the different options available like the ones above.
How to stop a foreclosure after the notice of default
You will have to take a different tactic to stop foreclosure once there is a notice of default in place.
One way to prevent foreclosure at this point is to sell your home, which can be done a few different ways:
- You can try to short sell your home, which means you sell the home for less than you owe but the lender forgives the difference and you stop foreclosure from going through. Your lender may or may not work with you this way and if you do a short sale, your credit will be damaged.
- You can file what is called a deed in lieu of foreclosure, which says that you are returning the home to your lender and you will no longer be responsible for paying the mortgage. You will take a hit on your credit score for this as it is treated like a regular foreclosure. The benefit of a deed in lieu of foreclosure is the lender may give you extra time in the home to find a new place to live.
Avoiding foreclosure with a foreclosure bailout?
Another option to avoid foreclosure is to attempt to get your interest rate lowered through a foreclosure bailout, which is a form of refinancing your mortgage. This is an easy loan to get no matter what your financial situation. If you have a credit score of at least 500 and 25% equity from your home, you can get one of these loans.
It is important to carefully check out any company that offers you a foreclosure bailout and read all the fine print. Some of these companies are actually trying to take advantage of homeowners in a bad position and you will end up with more financial problems when they are done with you.
The interest rate on these loans is not going to be low so you will need to have a good down payment so you can get the payments low enough. You can sometimes switch back over to a traditional mortgage after some time has gone by which will save you money.
You can also occasionally borrow extra cash based on your equity to pay your other past due bills. A foreclosure bailout should not be a permanent loan but instead a temporary solution.
Learning how to stop foreclosure is better done one step at the time. The key is to analyze one of the ways of avoiding the foreclosure process and take action if it is appropriate for your particular financial situation.