A downturn in your financial situation can leave you with few solutions that do not require foreclosure or filing for bankruptcy. However, before you resort to these methods, it is important to look at all your options especially if you want to maintain a good credit record and you want to preserve your chances of applying for credit in the future. Here are a few alternatives to foreclosures that are worth a look.
This basically is just payment of all debts. You can seek the help of family or friends, get another job for additional income, or sell property so that you have liquid cash to pay for your loan. In most cases, you can reinstate a mortgage up to the day before the final foreclosure sale.
Refinancing is a good idea if you have a good credit score and you have equity in your home. This method requires you to seek out a payment plan that is more affordable and agreed upon by you and the bank.
Loan modification is another option if you still have the ability to make payments but not enough to make your account current. You can apply to have your payments lowered to make it more manageable, such as lowering the interest rate or extending the years to pay so that monthly payments become easier to meet.
If you are lucky enough to have a mortgagee who understands your current inability to make payments, you can request to have collections postponed for a certain amount of time to save money, find another source of income, sell a property or recover from illness or injury. You resume paying at the end of the forbearance period. You may also be required to pay a certain amount for past due payments that became due prior to forbearance.
Rent your property
This is a great option if your mortgage is low enough to be paid by rental payments. However, it is important to consider other expenses that naturally go with owning a property for rent such as taxes, maintenance expenses and the like.
A short sale is another option if you want to avoid foreclosure and you have a home that is worth less than the amount of your loan. You can work with a short sale specialist to determine the value of your home and to negotiate with the lender to accept less than the value of the loan. In a short sale, you must also agree to sell your property for below its appraised value. When all parties agree, a short sale can help you chip a huge chunk off your overall debts while avoiding foreclosure and a negative credit score.
Instead of a short sale or the traditional route of listing with an agent, you can avoid an upcoming auction by connecting with an experience Real Estate Investor to get a cash offer. This option has many benefits that can be explained by the investor.
Also called deed-in-lieu of foreclosure, this entails returning the deed of the house and ownership of the property or house to the bank to escape foreclosure. This is only open to borrowers with one mortgage and some lenders may require borrowers to put the house up for sale for three months before they consider DIL. This route poses a considerably less negative impact on your chances of owning a house in the future compared to an actual foreclosure.
Foreclosure and bankruptcy are not the only solutions when regular loan payments become difficult to do. Check and see whether you qualify for any of the alternatives mentioned above if you are hopeful about paying off your debts, keeping a good credit score, and avoiding foreclosure.