If you’re struggling with an overwhelming mortgage and have fallen behind on your payments, you’re probably worried about going into foreclosure. If you’ve already received a notice of default from your lender, you might feel as though the foreclosure process is inescapable. Good news: It’s not. Even at this point, there are still avenues you can take to stop the foreclosure process.
Read on to discover five strategies you can use to prevent foreclosure.
1. Sell Your House
If you’re behind on your mortgage but haven’t received a notice of default (NOD) from your lender, you can avoid foreclosure by selling your house. But selling with a traditional realtor may not be the best option here since the average time to sell a home in Columbus is approximately 55 to 70 days.
If you’re worried you’ll be receiving a NOD in the near future, you need to sell your house fast to prevent your lender from filing that notice. That’s where a cash sale can be highly advantageous.
When you need to sell a house fast, the best (and easiest) way to do it is to sell to a cash home buyer, also known as a real estate investor. Even if your home needs work, a cash buyer can purchase it since they buy houses in any condition. On a cash sale, you can typically close in as little as seven days and get the cash you need to take care of your missed mortgage payments and avoid a foreclosure on your credit report.
2. Discuss Loan Modifications With Your Lender
If the bank hasn’t filed a notice of default on your loan, you may be able to negotiate new loan terms with your lender to stop the foreclosure process from moving forward. However, your lender’s willingness to negotiate new terms depends on your financial situation.
With new loan terms, you can catch up on missed payments and stay current on your mortgage going forward. Typically, lenders offer multiple options for loan modification, including:
- Payment forgiveness. Your lender may be willing to forgive a couple of missed mortgage payments to help you catch up. This option, known as debt forgiveness, can help you stay current on your mortgage going forward. But be aware: Lenders rarely offer debt forgiveness, so don’t count on it.
- Catching up on missed payments. Depending on your situation, your lender may be willing to put your loan in forbearance, which either reduces your mortgage payments or pauses them for a short period to help you catch up and regain your financial footing.
- Adding late payments to your existing balance. If you have enough equity in your home and meet your lender’s requirements, the bank may be willing to tack on any payments you missed to your existing loan balance. This is referred to as refinancing.
- Taking out another loan. If you purchased your house with a government-issued loan, you may qualify for another loan to cover the mortgage payments you missed. Known as a partial claim, this option is only available in specific situations and only works with federal loans.
- Changing loan terms. If you have an adjustable mortgage, your lender may offer to freeze your interest rate to make your payments more manageable. You may also be able to get an extension of the amortization period, depending on your circumstances.
3. Conduct a Short Sale
If your lender has already issued a notice of default but hasn’t yet scheduled your house for auction, you may be able to avoid foreclosure by conducting a short sale.
In a short sale, your lender gives you permission to sell your house for a price that won’t cover the total remaining amount of your loan. In essence, the sale price falls short of the amount you still owe on your house, which means there’s a deficiency balance on the loan.
If you receive an offer on the house during the foreclosure process, your lender must, at the very least, consider it. If the lender decides to accept the offer, the bank can agree in writing to forgive any deficiency balance created by the short sale.
While a short sale is a good option for some homeowners, it’s not appropriate in every situation, and some sellers shouldn’t pursue it. It’s also important to note that a short sale will have a negative impact on your credit, though not to the same degree as a foreclosure.
4. Turn the House Over to Your Lender
If you’re behind on your mortgage, you always have the option of deeding your home back to your lender. But this option, referred to as deed in lieu, comes with negative consequences. While it might initially sound like an easy way to avoid foreclosure, signing a deed in lieu will drop your credit score just as much as a foreclosure will. Generally, deed in lieu is recommended as a last resort for avoiding foreclosure.
5. File for Bankruptcy
When you file a bankruptcy petition, the court issues an automatic stay, which prevents your lenders from pursuing any further collection action against you. However, when you get to bankruptcy court, you’ll still have to answer for your debts in some shape or form.
Essentially, filing for bankruptcy buys you a little more time to get your finances in order. If the court determines you don’t have the income to make your monthly mortgage payments (Chapter 7 bankruptcy), you could lose your house in the end anyway. If you do have the monthly income to make your payments (Chapter 13 bankruptcy), the court will help you develop a repayment plan that better suits your current financial situation.
Sell Your House Fast With We Buy Houses Columbus
If you’re behind on your mortgage and facing foreclosure, let our team at We Buy Houses Columbus help. We buy houses in any condition and can close on your sale in a matter of days to help you avoid foreclosure. Even if you’ve missed mortgage payments, we can work with your lender to find a solution that works for everyone involved. To find out how much we can offer you for your house, give us a call at 614-699-6464, or feel free to request a cash offer now.