Facing foreclosure is an experience no homeowner wants to include in their journey. Fortunately, it is possible to avoid foreclosure through preventive and strategic measures. House Help will provide you with the knowledge and tools to secure your home and achieve financial stability. Here is a comprehensive guide to help you take proactive measures with a strategic plan.
Foreclosure is the legal process by which a bank (or other lender) reclaims a property when a homeowner fails to make their mortgage payments. Tragically, this devastating reality is life for many families this year. Foreclosure often leads to the loss of their homes and also has a large impact on their credit score for years. House Help works to make sure that you’re prepared and know all your options, so here are a few proactive steps homeowners can take to avoid reaching this point.
1. open communication with your lender:
The first step to take, and the most important when avoiding foreclosure, is being open and honest during communication with your lender. Don’t wait until financial hardship gets harsh enough to cause you to miss a mortgage payment to reach out. Lenders may be willing to work with you to find options for temporary relief if reached out to before a crisis point. All you have to do is explain your circumstances and provide documentation if necessary.
2. explore loan modification:
An option for relief is loan modification. A loan modification is simple. It is a edit of your initial mortage loan. During a modification you and your bank (or alternative lender) will renegotiate the terms of your mortgage. Options for modification include adjustments to the interest rate, an extension of the loan term, or reducing the principal. For those who do not see their finances improving, this is a great option. If your financial circumstances have gone through significant change, looking into restructuring your mortgage is imporant to consider. Be prepared to provide financial documentation to demonstrate your need for modification.
3. investigate refinancing:
Refinancing is when you take steps to replace your current mortgage entirely in hopes of attaining more favorable terms. This is dependent on your credit score. If it is still in good standing you could approve for lower interest rates. This will significantly reduce your monthly payments, making continual payment more feasible. Unfortunately, there are often costs associated with this option, so it isn’t the best fit for every situation.
4. seek forbearance:
A temporary solution to foreclosure is forbearance. In this your monthly payments are temporarily reduced or suspended. Reduction or suspension does not forgive the money owed, so this method will increase the length of your overall loan. Forbearance is a good option if your financial struggles are temporary. Unexpected medical expenses, emergency bills, or the loss of a job are good times to ask about forbearance. While your payments are in the forbearance period, there is no requirement to make full payments allowing you to get back on your feet. Unlike other options we have listed, you are required to repay the remainder of the payments once the period ends.
5. create a realistic budget:
Examine your present spending habits. Budgeting is tedious, but will help greatly when weighing different mortage payment methods. See if it is possible to create a budget that includes all of your essential spending on your current income. Remove any unneeded expenses, heavily prioritize debt payments, and allocate your income strategically. Budgeting intentionally can help you regain control of your finances, track your obligations, and locate gaps in your spending.
6. increase your income:
Increasing income is easier said than done, but is the simplest way to put more money towards your mortgage. It can be difficult to do this. A few ways you may be able to increase your income temporarily are to get a part-time job, try your hand freelancing, or search for additional income. Extra funds applied to missed payments will expedite your financial stability.
7. consider a short sale:
In a short sale you sell your home fast for cash. Unfortunately, the offered sale price is often less than the worth of the outstanding mortgage. If none of the alternative options we have listed are able to work for you, a short sale may be your only option. In order to begin a short sale you must first receive the lender’s approval and then locate a willing buyer. With this type of sale you will not get the full worth of your home, but in a foreclosure situation this sale will stop you from severely damaging your credit score. When it is impossible to continue making mortgage payments, a short sale is likely a more favorable alternative. Check out House Help’s Cash Offer Calculator to see how much you can get for your home.
8. investigate government assistance programs:
Facing foreclosure is stressful. Fortunately, there are several government programs that have been created to assist homeowners facing financial difficulties. The Home Affordable Modification Program (HAMP) and the Emergency Homeowners’ Loan Program (EHLP) are a couple examples. Options offered may include loan modifications, refinancing methods, and financial assistance.
9. consult with a housing professional:
A real estate agent with experience in the field has a complete understanding of all of the important information you need. If it is possible to meet with an agent, it is highly recommended. In consulting with an agent they will help you make the best decision for your individual financial needs.
When you meet with House Help our licensed agents will provide you with:
- Recommended repairs to maximize sale price
- Repairs required to qualify your home for special financing such as VA and FHA financing. This dramatically increases the number of buyers and demand for your home.
- Estimated market price after all suggested repairs are completed.
- Estimated market price As Is without doing any repairs.
- Estimated off market price if you were to sell to a cash buyer before listing on market.
- Seller Net sheet showing you your estimated proceeds in each one of the selling options above after all estimated cost, fees and commissions are deducted.
10. legal assistance:
If you face a rapidly approaching disaster, you may want to opt for legal advice. In your search, locating an attorney who specializes in foreclosure defense will be extremly beneficial. These attorneys already have the knowledge of the lawas surronding forclosures. In working with them you are sure to understand your rights. An attorney will join you as you navigate the legal process to be sure the resolution reached is in your favor. This option is espeacilly reccomended if you have reason to believe your lender was utilizing predatory lending practices.
Empowering Homeowners in Times of Financial Strain
Even considering the possibility of facing foreclosure can be overwhelming. For this reason it is so important to know the options available to you. Through proactive thinking, intentional budgeting, and gaining knowledge of refinancing options you can avoid this outcome. Staying informed gives you the power to overcome financial difficulties and secure stable housing for your future.
At House Help MN we understand the importance of a home and how big of a decision it is when it comes to buying or selling, and that not every situation is the same. That is why we follow a strict code of ethics and are transparent with everything we do. With 20 years in the real estate industry, we will walk you through multiple options and help you every step of the way. We will find a solution that is right for you and make the process quick and as easy as possible.