Foreclosure can be a very intimidating and confusing concept to grasp. In today’s economy, it is more important than ever to have a basic understanding of the process and what it means for you and your family. In our previous blog post, we explained what foreclosure actually means. Now we will discuss the foreclosure process by outlining what your options are when facing foreclosure, as well as how you can avoid foreclosure altogether.
What are your options when facing foreclosure?
If you are having trouble making payments on your loan, the first action to take is call your lender. Attempt to work with him or her before a Notice of Default is filed, because once the foreclosure process starts, it is often difficult to stop if your finances will not allow you to make your payments on the spot. Typically, lenders do not want to foreclose, so providing them with options to work on is beneficial.
Options Before a Notice of Default is Filed Include:
Time to make up payments – Lenders will often agree to wait before taking legal action to let you
figure out a payment plan that best suits you.
Forgiving a payment – Although this option rarely happens, if you agree to make your payments
on time and stay current, lenders may waive your missed payments.
Spread out missed payments over a longer term – Ask your lender if you can have a longer time period to pay him or her smaller amounts.
Change the terms of your loan – Work with your lender to see if your interest rate can change to something more manageable.
Refinance – Your lender can change the conditions of your loan to add your back payments to increase your loan balance.
Partial Claim – In some situations, borrowers are allowed to apply for another loan from their lenders. This loan can be a way of paying back missed payments.
If you cannot make up lost payments and your lender will not work with you, what else can you do? Selling your home is an option, and some lenders will forestall a foreclosure if you inform them the property is actively listed for sale at a reasonable, marketable price.
Another option for situations where the property value is less than what is owed is a “short sale,” where the lender will accept less than what is owed. Leaders are increasingly receptive to this approach and prefer it to foreclosure, delaying foreclosure to allow for the sale. So, do not be discouraged if you are in this situation, and speak with a real estate professional at SAFAssist who can explain the entire process to you.
How do I prevent foreclosure all together?
The best advice is to stay current on your payments. If you run into a difficult, unexpected and unpreventable circumstance, be open and honest with your lender. Being able to work with your lender when situations become difficult is a key component in avoiding foreclosure.