Foreclosure Alternatives

Let’s say you’ve missed a few mortgage payments and your lender finally sends a notice of default. Times are tough and you’re growing desperate. You fully understand that you’re about to lose your home and take a huge hit on your credit. If foreclosure seems like your only option, think again. 

The absolute very first thing you should do when facing foreclosure is contact your lender. This will make them want to fight with you because they know you are willing to fight for a solution. The earlier you ask for help the greater your chances of winning are. 

Once you tap to your lender, you will have a few options before you. Yes, one will be the foreclosure opportunity, and it could work in your favor if done correctly. 

  1. Sale or rent

If you are in line to pay your mortgage off traditionally, but anticipate there could become a problem you can hold on as long as possible for a buyer. 

You can also rent their home to pay for your mortgage until the home sells.

  1. Short sale

This usually happens when the value of a home is lower than the equity, and there's not enough to cover the mortgage. This is also known as being underwater. The lender will agree to accept less than the amount owed by the borrower by the sale of a third party. 

A short sale will work Like this. A deal will be brokered so that the lender can sell the property for what they can. If the sale amount is less than what is owed, the money goes to the lender and the remaining is relinquished. Typically the lender will pay the seller's closing costs. Expect this process to be about 90 to 120 days. 

The One thing the seller must prove is there a hardship. This means the loss of income, death of a spouse, etc. the point is they must explain why they cannot pay their mortgage anymore. 

  1. Deed in lieu of foreclosure agreement

What this does is allow a sale between a lender and a borrower to be nullified. They are basically agreeing to skip the foreclosure process, and the borrower will give their deed to the lender. 

The lender will exempt the borrower from any liability surrounding the mortgage. If the property is worth a less than the mortgage, the lender usually forces the borrower to pay a little of the remaining loan balance. 

You can be eligible for a deed in lieu if you’re having severe money troubles and cannot afford your current payments, and were unable to sell your property for a fair amount in 90 days. 

In sum, this agreement is a solution resolved around negotiation. The borrower loses their home and the lender won’t be paid back in full. 

Post a Comment