Home foreclosure is an action taken by banks or mortgage lenders once a borrower fails to fulfill mortgage payments within a given deadline. Apart from potentially losing your home, a foreclosure may also hurt your credit rating.
Here are four ways to avoid it:
Modify Your Loan
Before settling with a foreclosure, ask your lender if you can modify your loan. A loan modification can make your existing loan more feasible by allowing lower monthly payments, lower interest rates, and an extension for unpaid payments. A real estate lawyer from Denver says that lenders are typically open to this agreement, especially if the homeowner has taken additional steps (reducing expenses, getting an additional job) in meeting their financial obligations.
Declaring bankruptcy seems unfortunate, but it is one of the most effective ways to prevent home foreclosure. Upon filing one, federal laws prohibit debt collectors, including mortgage lenders, from any collection activities. This gives you more time to settle any existing loans and temporarily freeze a pending foreclosure case.
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Consider a Short Sale
Also called a pre-foreclosure redeemed, a short sale allows a homeowner to sell his property for less than its current value. Lenders typically agree to this arrangement as it saves them more time compared to proceeding with a foreclosure case. Even with various tax implications, shorts sales are deemed more efficient than public auctions. Some states, however, do not permit this so it is advisable to check local laws first.
Sell Your Property
Selling your property may not be the best option, but doing this allows you to pay existing loans and start anew. Home selling may not be easy, especially for first timers, which is why it is ideal to seek the help of a broker. Determine the value of your home and study if the price can cover debts and new home expenses.
Before battling a foreclosure, make sure to seek the advice of a credible lawyer. This way, you can protect your property and take advantage of law-mandated rights.