Life is already stressful enough, and with inflation on the rise, it is understandable that making house payments would be a big impact on your finances. Home foreclosure can come at the worst and most unexpected times, however, the actual process of a house being foreclosed can take up to several months to a year depending on which state you live in.
There are a lot of different options to help maintain your credit score and future when facing foreclosure. A real estate attorney like Corey Beck can help you go through the necessary steps to try and help your credit and financial situation when facing foreclosure. Continue to read more to learn what options are available if you are currently or may be worried about facing foreclosure.
Refinancing
If you think you may be in danger of missing payments on your home, it is probably a good idea to refinance your home before missing that payment. It is possible to pay off the higher-payment loan if you refinance at a lower interest rate before your credit score suffers. This can protect you from facing foreclosure and protects your credit score from taking a drastic drop.
It is best to have a real estate attorney help you look over your mortgage options and go over your options with you of refinancing or even short-selling your home to protect your finances from foreclosure.
Loan Modification
Your lender company does not want you to face foreclosure since it becomes a big legal hassle for them once the home is foreclosed. You can ask to modify your loan with your lender if you feel as though you may be close to experiencing foreclosure. Modifying your loan either lowers the interest rate, reduces the principal, extends it to 40 years, or lowers the principal by reducing the principal.
Banks will be a bit more hesitant to modify your loan, but it can be negotiated between you and your lender how much you are modifying your loan. The biggest con with modifying your loan is banks are required to report to the IRS any reductions in their principal, and the reduced amount counts as income for tax purposes.
It is a good idea to reach out to your bank ahead of time if you see yourself unable to make your house payments on time, contact your lender, and try and negotiate an easier payment plan that can save you from having to go through the difficult foreclosure process.
Forbearance
A forbearance is an agreement between a lender and a borrower to delay a foreclosure. You have to get your lender to agree to a forbearance and understand that the late balances are added to the end of the loan. This will extend your loan payment period for however many months you paused payments.
This will not wipe away any debts owed to your lender, but rather gives you more time to gather funds to start making proper payments on your mortgage. In recent years, banks were forced to accept forbearances due to the high increase in individuals impacted by the COVID-19 pandemic. However, keep in mind that your bank may deny your request for a forbearance, so it is best to explore as many options as possible.
Repayment Plan
If your lender is not willing to modify your loan, you can request a short-term payment plan. This gives you an opportunity to catch up on your payments that may be growing due to late fees or past-due amounts.
This option is only available if you are confident that you will have the funding to start making your payments. This just gives you more of a grace period to try and help get caught up on bills or finances.
Short Sale
A short sale means you are agreeing to sell the house for less than what you owe your lender. This can also affect your credit score as well, so we do not advise doing a short sale on your home unless absolutely necessary.
You also have the option instead of a short sale to have a Deed in Lieu which surrenders the rights of the house to your lender. This will still affect your credit score and there still is a risk of owing fees after the lender sells the house.
Consult with a real estate lawyer before choosing to short sale or deed in lieu to better understand what options work better in protecting your credit score and your finances.
Sell Your Home For Cash
If you for sure cannot make payments or afford to stay within your home, your best option could be just to sell your home. Avoid and skip all the hassle of selling your home with a realtor by simply just selling it for cash.
Most times selling your home takes a lot of money for maintenance and renovations and it takes up a lot of time that you may not have. Skip all the headaches and hassle of selling your home by just asking for cash. This is an upfront option that will quickly get you out of your situation and help you avoid foreclosure entirely.
Know Your Options
Foreclosure is a long and nerve-racking process that can really damage your credit score, finances, and mental health. Keep your life intact and alleviate the stress by knowing all your options to best protect yourself from facing the effects of foreclosure.
There are useful resources to help talk you through your options and let you know different outcomes possible by talking it through with a real estate attorney. Corey Beck has practiced law in Las Vegas for the past 26 years and understands the real estate market and cycle within the Valley. Get a free consultation with Corey today and start protecting your home and finances from foreclosure today.
