Dealing With Foreclosure

Dealing with foreclosure is a scary a stressful situation for almost everybody. After all, who wants to give up their home to the bank?

A foreclosure occurs when the borrower of the mortgage cannot afford to make the payments to the lender, also known as defaulting on the loan. This often results in the bank or lender seizing the property and usually selling it through auction at a significantly lower price than what the current market dictates. Foreclosure also negatively effects the credit score of the borrower.

Ways To Avoid Foreclosure

Refinancing – If you have trouble making payments on your loan, then talk with your lender before any drastic actions happen. In most situations lenders do not want to seize your house and are more likely to modify your payments than actually seize your home.

Short sale – Because foreclosure can be costly for both the borrower and lender, on occasions the lender may agree to sell the home for a loss in lue of paying the expensive fees associated with foreclosure. A short sale also prevents the borrower from a ruined credit score.

Bankruptcy – Bankruptcy will push back the foreclosure process 3-4 months, which could allow the borrower more time to acquire the necessary funds or work out a deal with the lender. Chapter 13 bankruptcy lets you pay off the “arrearage” (late, unpaid payments) over the length of a repayment plan you propose–five years in some cases. But you’ll need enough income to at least meet your current mortgage payment at the same time you’re paying off the arrearage. Assuming you make all the required payments up to the end of the repayment plan, you’ll avoid foreclosure and keep your home.

Before ultimately deciding to default on your loan and dive into foreclosure consider all your options and utilize the expertise of a local mortgage broker as the recent housing crisis has created many more solutions for struggling borrowers to stay in their home.