Have you received a foreclosure notice in the mail? If so, it’s imperative for you to take swift action against it. Not only can a foreclosure ruin your credit rating, but losing your home is never a good thing and it can be very hard to find a good place to live if you have gone through a foreclosure. Fortunately, there are some options that can help you deal with this critical situation with ease. Getting a foreclosure notice doesn’t mean you have to lose your home.
1) Bring Your Loans Current
Bringing the loan current means that you pay the total amount past due. You can stop the foreclosure process by informing your lender that you will pay off the default amount and extra fees. Your lender would prefer to have the money much more than they would have your home, so unless there are extenuating circumstances, this should work. Unfortunately, this option isn’t viable for most people, because most people don’t have the money to bring their loan current.
2) Modify the Loan
If you cannot make your monthly mortgage payment, you can try modifying the terms of your loan. Modifying the terms of your loan may reduce your monthly payments or interest rate, depending on what your current circumstances are. You may be able to modify your loan with your lender, or you may be eligible for the government Homeowner Affordability and Sustainability Plan (HASP), which allows you to restructure your mortgage. According to Dickson Frolich, HASP is intended to help homeowners who owe more than their home is worth or who have more debt on their home than income.
3) Sell Your Home
You don’t want to lose your home, but foreclosure may be inevitable. In order to avoid some of the problems that come with foreclosure, you can attempt a short sale on your home. Before you do this, though, you need to get permission from your lender, or you may end up in significant legal trouble. The purpose of making a short sale is to sell the home for enough money to make up what you owe to your lender. If you aren’t able to sell it for that amount, you may have to pay the remaining balance of the loan. A short sale isn’t always a good option, so make sure you do your research before you decide on this option.
4) Declare Bankruptcy
Bankruptcy should only be used as a last resort because it has some pretty severe consequences and it may not be successful in allowing you to keep your home. When you file for bankruptcy, all lenders and creditors you have are given a stay on your loans, meaning they can’t collect until your bankruptcy case has been settled, but this stay doesn’t last forever. If your lender has started the foreclosure process, they cannot repossess your home until everything has been worked out. Depending on the type of bankruptcy you file for, you may be able to restructure your debts and create a payment plan to allow you to keep your home or you may be forced to sell your home as part of a liquidation of your assets. Before you decide to declare bankruptcy, talk to a financial adviser to make sure that this isn’t going to cause you more problems.
First Alliance Credit Union Collections Manager Leanne Trom explains more about what happens to your credit score when you file for bankruptcy on KIMT.
Let First Alliance Credit Union Help you Avoid Foreclosure
A foreclosure doesn’t have to be the end of your home or your credit score. You have to take the right steps quickly, though. Contact First Alliance Credit Union to have one of our experts explain all the options at your disposal.