You have certain responsibilities as a homeowner – including paying your mortgage and maintaining your home. To succeed, it’s important that you always have a pulse on your financial well-being. To quickly assess your financial situation, ask yourself:
- Can you afford routine home maintenance, such as servicing your air conditioning and fixing a broken window?
- Are you able to pay more than the minimum amount due on your credit cards?
- Would you still be able to pay your mortgage if you faced a temporary reduction in pay?
If you answered “no” to any of these questions, you may be at risk of falling behind on your mortgage payments which, if not addressed with your loan servicer (the company listed on your mortgage statement), can lead to a foreclosure – the results of which can be emotionally and financially devastating.
Today we’re going to discuss some of the things that you can do to avoid foreclosure. But first, let’s clearly define what it is and what it can mean.
What is Foreclosure?
Foreclosure is a legal process by which the mortgage company takes ownership of the property (your home) to pay off the mortgage because the loan is in default. The process begins when a borrower fails to make their mortgage payments.
When a home is foreclosed upon, the lender typically repossesses and attempts to sell the house. This happens because mortgage loans are secured by real estate, meaning your home is used as collateral. Since your home is the collateral, it can legally be seized by your lender when you fail to make payments.
The process of foreclosure is different in every state – in some, foreclosure can happen in as little as a month; in others, the process could take longer. In either case, the results can be devastating to your credit, cause distress in your life and make it far more difficult and expensive to get a mortgage in the future.
A foreclosure is considered a very negative event on your credit report and will remain on it for seven years after the date of your first missed mortgage payment. The number of points by which a foreclosure will impact your credit score varies depending on your credit history.
The hit your credit takes from a foreclosure can impair your ability to purchase or even rent a home again. So, if you’re facing a life change that impacts your ability to pay your mortgage, it’s time to reach out for help and avoid the costly impacts of foreclosure.
Don’t just walk away from your home.
There may be better options. The most important thing is to avoid foreclosure—and options may be available to assist you if you’re ready to leave your home. Some options may even offer cash incentives to help you move and transition into different housing. Now’s the time to take action before it’s too late!
Communicate With Your Lender
If you know that you are going to have trouble making your mortgage payments, contact your lender immediately and let them know you are having financial difficulties. This allows your lender time to work with you to create a plan. Remember, do not stop paying your bills, and do not wait until you cannot make payments before you act. Learn how to talk to your lender about trouble making payments.
Remember, your mortgage lender does not want to your home. They want to get paid and will help you explore your options to avoid foreclosure. Some of the options to explore with your lender are:
- Forbearance – This is an agreement between you and your loan servicer (the company listed on your mortgage statement) to either suspend or reduce your monthly mortgage payments for a specified period of time. The forbearance agreement is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments when your financial situation stabilizes.
- Modification – You and your loan servicer (the company listed on your mortgage statement) agree in writing to modify or restructure your mortgage to make it more affordable and sustainable. A loan modification typically reduces the monthly payment amount by changing the terms of the mortgage, such as extending the number of years you have to repay the loan and lowering the interest rate.
- Payment Deferral – This option allows you to defer up to two months of missed payments to the end of your mortgage term without accruing any additional interest or late fees. Ask your loan servicer if they offer Payment Deferral.
A foreclosure on your home can be devastating – financially and emotionally. If you’ve worked with your loan servicer and determined that you don’t qualify for a modification or alternative to stay in your home, or you’ve decided you no longer want to live in your home, don’t give up. There is another option that will allow you to exit gracefully from your home.
Selling Your Home
Selling your home is an option if you have a financial hardship and can no longer afford it. But, if you’re facing foreclosure this option requires you to move quickly. Maybe the best way to do this is to sell your house to a trust investor for a fair, cash offer.
Investors are people or companies that want to purchase your home in order to make money. Negotiations will be quicker and easier than if the buyer was going to live on your property.
The advantages of working with an investor are numerous. You can:
- Avoid the damage to your credit caused by a foreclosure
- Pay off your remaining mortgage debt
- Have more flexibility and control over exiting your home
- Benefit from the equity in your home by keeping your share of the proceeds from its sale
- Use your proceeds for new housing, other expenses, or savings
A Note of Caution
Beware of foreclosure rescue scams. Unfortunately, scammers masquerading as legitimate housing counselors often try to take advantage of homeowners who are vulnerable. As you work through your mortgage issue, keep a skeptical eye out for fake programs and scams.
Warning signs of a scam include organizations that require advance payment or that guarantee to fix your foreclosure problems. In particular, beware of offers to help you get a loan modification through the federal HAMP Program, a federal loan modification program that expired at the end of 2016.
Also watch out for phone calls or mail solicitations that appear to be from your mortgage company, but direct you to send payments to an unfamiliar address that doesn’t match the one on your mortgage statement.
Homeowners who are struggling with their mortgage payments are facing tough choices—do you stay in a home you may no longer be able to afford or should you try to leave? While it may be difficult to think about leaving your home and making this decision, it may be the best option if other solutions to keep you in your home are no longer viable.
If you’re facing foreclosure, Black Girls Buy Houses may be able to help. We buy houses in any condition and close fast for all cash to help you move on with your life. Contact us today to see if you qualify!