You never expected to find yourself in this situation. When you purchased your home, you didn’t plan for forclosure. Now that you’re home’s in pre-foreclosure, you’re left wondering what to do and how to stop it.
With everything seeming to move quickly, you feel as though you’re left spinning in circles unsure what next move to make. Going through the foreclosure process on a home is never an easy situation to be in. Emotions are running high, but most importantly, you’ll need to ensure you have a plan for the future of you, your family, and your finances.
Thankfully, there are a few ways to stop the foreclosure process before it transforms into a full foreclosure situation. In the guide below, you’ll find a list of ways to do just that. Continue reading to get started!
1. Modify Your Current Loan
One of the first steps to take is speaking with your loan lender. Communicate with them about your missed payments and your current financial struggles. Be open and honest with them from the very first missed payment.
The two of you may be able to work something out to help the situation. You can consider asking the lender to extend the length of the loan. When the loan is extended, you’ll pay less each month but for a longer period of time.
However, in the meantime, you’ll have reduced monthly payments. You may also want to consider asking the lender to decrease the interest rate on the loan. Keep in mind that it’s much easier for the lender to work something out with you than have to go through the foreclosure process.
During the pre-foreclosure stages, if you and the lender can come to an agreement, then the foreclosure process ends and regular payments on the loan will continue.
2. Deed the Property
Another option you have is to deed the house back to the lender. This process is called Deed in Lieu of Foreclosure. This might be a great next option to look into if modifying the loan isn’t an available option.
In order to deed the house back to the lender, both parties (you and the lender) must voluntarily agree to do so. If the lender agrees, you’re then released of all responsibilities regarding the mortgage. Once you’re behind on your mortgage and know you can’t pay it back, consider this option to settle your debt.
The pre-foreclosure process will then end.
3. Pay Your Outstanding Balance
Paying the outstanding balance on your loan will also remedy the loan and stop the pre-foreclosure process. Do keep in mind that you’ll also need to pay any penalties or fees for paying late as well. Once you begin paying your monthly payments again, most lenders will stop the pre-foreclosure process.
You may want to speak with your lender about how to go about paying off the outstanding balance. Some lenders will set up a payment plan for you, which allows you to make payments towards the outstanding balance. Others, however, will want the lump sum in full.
The best way to sort it out is to speak with your lender.
4. Refinance the Loan
Refinancing the loan is another great option you have. When you refinance your current loan, you take out a new loan with a different lender, and your current loan is paid off with the new loan. You can also refinance through your current lender, but it’s best to shop around and find a lender with the lowest interest rates.
When you refinance, you’ll need to pay new closing costs, but it can be beneficial in the long run because your monthly payments will be lowered. It’s ideal to start the refinancing process while your current mortgage is in good standing. As soon as you know there’s been a change in your finances, and you won’t be able to make payments, consider refinancing.
5. Sell the House as a Short Sale
A short sale is when you sell a home while it’s in pre-foreclosure. Here’s how this works: the sale of the home can be a private transaction involving the buyer and yourself but the bank must approve it before the sale can be finalized. The reason why it’s called a “short sale” is that most lenders will accept sale prices that are lower than the remaining balance on the loan.
They do so because it saves them both expenses and time involved in dealing with a foreclosed property. Lower selling price also encourages more potential buyers to buy before the foreclosure process begins.
6. File for Bankruptcy
One of the very last options to consider is filing for bankruptcy. Once you file for bankruptcy, lenders and debt collectors are no longer able to continue coming after you for collections. This is true even if the auction sale has been scheduled.
Most bankruptcy trustees will allow you to stay in your home with your current mortgage. They’ll work with you on creating an affordable payment plan to start paying off the outstanding balance. This will stop the pre-foreclosure process under bankruptcy chapter 13.
Stop Pre-Foreclosure Today!
Is your home currently in the pre-foreclosure stages? You can stop pre-foreclosure today by following the helpful advice listed here in this guide! Be sure to research and consider each of these options before making a final decision.
You can also sit down with your bank or lender and speak with them about all the possible options to resolve the situation before it’s in full foreclosure.
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