3 Ways to Stop a Foreclosure, Sell in Cash ...
3 Ways to Stop a Foreclosure
The most pressing issue for any homeowner who is unable to keep up with mortgage payments is how to stop foreclosure. The investment lost by having a property repossessed is a major blow to any homeowner’s financial well-being. The following are three of the most common ways to stop foreclosure.
1. Mortgage Loan Modification
Loan modifications usually consist of reducing monthly payments by lengthening the mortgage term. A good modification can even lower interest rates while merging overdue payments into the balance. Initiating a loan modification is done through the homeowner’s mortgage servicer. Payment statements include the servicer’s contact information.
An applicant should be prepared to submit income and expense information such as bank statements, pay records, and tax returns. It is necessary to prove financial difficulties along with the ability to make reduced payments. Federal law prohibits foreclosure by lenders while a loan modification is being reviewed.
One of the other ways to stop foreclosure is bankruptcy. An automatic stay will be supplied by the court when bankruptcy is filed. A stay halts foreclosure and prevents debts from being collected by creditors. If the sale of the home has already been scheduled by the lender, it will be postponed by at least three months.
Two types of bankruptcies are most used on foreclosures. Chapter 7 bankruptcy is a means of delaying the foreclosure and eliminating liability for any remaining mortgage debt following the foreclosure. This delay is also a good opportunity to negotiate with the lender. Chapter 7 relieves debt such as home equity loans and junior mortgages but is not the best choice for maintaining possession of the property.
Chapter 13 bankruptcy is the option used by owners who are intent on keeping their homes. Debts can be restructured and repaid for a period of up to five years. Late mortgage payments can be paid through this plan which allows many of its participants to avoid foreclosure.
3. Short Sale
For homeowners worrying about how to stop foreclosure and sustain less damage to their credit scores, a short sale may be the answer. In this type of transaction, the house is sold for less than is owed on the mortgage. For this reason, a short sale can only be made with the lender’s approval.
The lender may call for the borrower to pay all or a portion of the difference between the mortgage and sale price. The lender may even choose or be required, depending on certain state laws, to forgive the difference.
Since short sales need lender approval, they can take longer than a normal sale. This leaves more time for the prospective buyer to back out of the sale.
Fortunately, there are companies that give no-obligation quotes for cash offers on homes. This type of fast transaction increases the chances of a successful sale, which can go a long way in sparing the credit score and peace of mind of the seller. If you are looking into your options to avoid foreclosure, give us a call and we can help you weigh the pros and cons, and have you back on your feet in a flash.