Facing foreclosure is one of the most difficult and overwhelming experiences for a homeowner. However, there are plenty of options that may help you keep your home or sell it for a minor loss instead of being evicted from the property.
This article discusses how to stop foreclosure and the different options you have if you think foreclosure is inevitable.
What is foreclosure?
Foreclosure is a legal proceeding that initiates when a borrower falls behind on their mortgage payment. The lender must take action to either seize the property or come to a solution with the borrower for how they will start making their monthly payments.
There are plenty of reasons why borrowers go into foreclosure. Regardless of the reason, lenders have a legal team and know how to handle foreclosures when they arise. However, the lender typically tries everything they can to work with the borrower to avoid foreclosure proceedings and save everyone time and money.
How to stop foreclosure
Borrowers who find themselves facing foreclosure may think they have no options and nowhere to turn to, but this couldn’t be further from the truth. Below are some of the best ways to stop foreclosure whether you’re a first-time homebuyer or have lived in your home for decades and face financial hardship.
Forbearance
Signed in 2020, the CARES Act allows borrowers to request forbearance, which is a temporary suspension in monthly mortgage payments for borrowers facing hardship due to COVID. Examples of hardships may include job loss, reduced pay, or a reduction in working hours.
The forbearance period is typically six months long, although this can vary. This allows the borrower to determine how they will make ends meet without having to worry about a monthly mortgage payment. If the borrower needs more time after the initial six-month period, they can request to extend the forbearance.
However, it’s important to understand that forbearance doesn’t mean the money is forgiven– you may be required to pay the deferred amount in full once your forbearance period ends. Be sure to talk to your lender so you have a comprehensive understanding of the terms of your forbearance and how to pay back your deferred payments.
Short sale
A short sale is the process of selling a property for less than the amount due on the mortgage. The proceeds from the short sale go directly to the lender, who can then either pursue a deficiency judgment or forgive the borrower for the outstanding balance.
Short sales happen when a homeowner faces financial hardship and wants to stop foreclosure. You’ll need your lender to sign off on the short sale for approval before the process begins.
Short sales are one of the most common ways to avoid foreclosure, but it’s important to understand that conducting a short sale will have a major impact on your credit. According to Credit.com, short sales may drop your credit score by 160 points and take years to recover.
Are you facing foreclosure? Capable Home Buyers will buy your house for cash regardless of the condition of your home. Give us a call at 757-699-1201 or check out our YouTube video for more information on how you can stop foreclosure.