How to Stop Foreclosure ASAP: Your Ultimate Guide
Understanding Foreclosure
Facing foreclosure can be an overwhelming and stressful experience. But don’t lose hope—there are several options available to help you stop foreclosure quickly and potentially keep your home or sell it fast for cash. This blog post will guide you through practical strategies you can apply immediately to try and avoid foreclosure or how to work with a cash home-buying company if you need to sell your property.
1. Communicate with Your Lender
The first step is to reach out to your lender. Many lenders are willing to work with homeowners to avoid foreclosure, as it is often more cost-effective for them. Discuss the following options with your lender:
- Forbearance: This is a temporary reduction or suspension of mortgage payments. It can provide you with the time needed to improve your financial situation. This, however, will only prolong the inevitable as the payments get applied to back end of your mortgage. You will still owe these payments and they will instead be applied at a later time, based off of what was agreed to by your lender. This option makes the most sense if you have fallen on hard times that will likely just be short-term.
- Loan Modification: This involves changing the terms of your loan to make payments more manageable. It can include extending the loan term, reducing the interest rate, or adding missed payments to the loan balance. It is important to note that not every borrower will qualify for these programs. Qualifying will take into account your credit worthiness and income to some degree. More importantly, this will add additional years to your mortgage if you are approved. While adding more debt for a longer period of time is not ideal, this could be a great option to lower your monthly payments in the short term if you're able to qualify.
- Repayment Plan: A repayment plan allows you to catch up on missed payments by adding a portion of the overdue amount to your regular monthly payment. This will be the most effective way to prevent foreclosure without creating more issues down the road for you and your family. You can speak with your lender about assessing your mortgage arrears and they will break up the back payments into smaller pieces and add them to your current monthly payments. While this option is the most effective, it will increase your monthly payments.
2. Seek Professional Counseling
Housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD) offer free or low-cost advice to homeowners facing foreclosure. These professionals can help you understand your options, negotiate with your lender, and create a plan to get back on track. They may even work with you on providing payment assistance programs.
3. Consider a Short Sale
If keeping your home is not feasible, a short sale might be a viable option. A short sale involves selling your home for less than the outstanding mortgage balance, with the lender’s approval. This can help you avoid the negative impact of foreclosure on your credit score and potentially allow you to walk away from the property without owing any additional money.
The con, however, is usually the time to accomplish a short sale is fairly long. Once a lender approves the short sale, the submitted offers will be forwarded directly to the bank and/or lender for review. During their logistical periods, you may wait weeks, even months for communication which can leave sellers feeling stressed and uncertain about their situation for quite some time.
Once an offer is accepted and approved through the lender, the process from there may still take a few months as they handle their back-end process. The average timeline to complete a short sale is roughly between 3-6 months start to finish. This may be your best option if you are not in a major rush. It is important to note that a short sale will only make sense if you DO NOT have equity above your mortgage payoff amount.
4. Deed in Lieu of Foreclosure
A deed in lieu of foreclosure is another option if you cannot sell your home or make mortgage payments. In this arrangement, you voluntarily transfer the deed of the property to the lender in exchange for being released from the mortgage obligation. While this will still impact your credit, it is generally less much damaging than a foreclosure.
Some important considerations to take into account are you must ONLY be behind on the mortgage. If there are other liens on the property, such as past due water payments, property taxes, etc - you will STILL be responsible to pay those off to accomplish this strategy. If the liens are large amounts, the mortgage company may decline this route entirely. It is also very important to note that the IRS may consider this a taxable event and you may be responsible for additional income tax at the close of the year. Consult with your accountant or attorney to determine if exemptions aply in your situation.
This could be a good option if you have no equity in your home and are ONLY behind on just your mortgage payments. Going this direction essentially just has you pass the deed of the home back to the bank and walk away. While you will not receive any proceeds, this could be a good option to avoid dealing with the repercussions of a foreclosure on your credit score.
5. Sell Your Property to a Cash Homebuying Company
Selling your property quickly will likely be your best option in most situations when facing foreclosure. A great option to consider is working directly with a cash home buying company. These companies specialize in buying homes in completely as-is condition, allowing you to avoid the lengthy and uncertain traditional sales process.
This is likely most suitable for homeowners in a foreclosure situation where there is no time to waste and they just want a fast, hassle-free cash sale.
Here’s how it works:
- Quick Sale: Cash homebuyers can often close a deal within a few days to a couple of weeks, depending on your situation, providing you with fast relief from mortgage payments and financial stress. This will also save your credit and ideally have you walk away with something, rather than the bank just taking the house from you. It's important to note that a foreclosure stays on your credit report for 7 years.
- No Repairs Needed: Cash buyers purchase homes in their current condition, as-is so you won’t need to invest in repairs or upgrades as you typically would in traditional home sale. There's also no inspections or appraisals that would affect your outcome.
- No Commissions or Fees: Unlike traditional real estate transactions, selling to a cash homebuyer almost always involves no realtor commissions, no closing costs, and no junk fees. Ultimately, putting more money in your pocket at the closing table.
Final Thoughts
Overall, stopping foreclosure requires prompt action and exploring all available options. Whether you choose to work with your lender, seek professional counseling, or sell your home to a cash buyer, the key is to take control of the situation as soon as possible. By understanding all of your options and making informed decisions, you can navigate this challenging time and protect you and your families financial future.
We encourage you, if you’re facing foreclosure and need to sell your home quickly, contact us today to discuss how we can help you achieve a fast, hassle-free sale. We are a family run business that prioritizes making other families our own. Don’t wait—your peace of mind is just a few clicks or phone call away.