Understanding Foreclosure And How To Prevent It From Happening To You
Going through a foreclosure is a disheartening time in anyone’s life, as it usually means factors outside of your control have made you unable to pay your mortgage, such as a loss of income or economic recession.
However, just because you aren’t able to pay your monthly payments doesn’t mean you have to settle for foreclosure and all the negative effects that come with it.
In this article, we will examine three mortgage relief strategies you can try to prevent the foreclosure process.
What is Foreclosure?
Foreclosure is the legal method in which a lender tries to recover the number owed on an unpaid loan on a home or property by taking possession of the property and putting it on the market. Typically, the process is triggered once a recipient misses various monthly payments. However, it may happen once the recipient fails to fulfill different terms within the mortgage document.
A foreclosure will significantly affect your credit score, prohibiting you from getting loans at a reasonable interest rate. That’s why it is crucial that you seek out mortgage relief before the foreclosure process is finalized.
How To Stop Foreclosure
There are several ways to stop a foreclosure and seek mortgage relief before it affects your credit score. However, not all of them are equally effective. Below are three you should consider.
Apply for a Forbearance
A forbearance is an agreement between you and the lender to postpone payments for a set amount of time. After the forbearance period ends, you are expected to pay the total amount owed during the postponement in one lump sum.
During the forbearance period, it is crucial that you save the money to pay the lump sum, or you will still face foreclosure. Many people struggle to raise money during that period, so they turn to mortgage relief efforts such as short selling (we’ll discuss below) or refinancing their mortgage.
Short Sale Your Home
A short sale is a method of mortgage relief where you sell your property for less than what is owed to the lender. You still owe the difference to the lender. However, a short sale looks much better on your credit report than a foreclosure. Short selling is complicated, so you must talk to a short-selling specialist to ensure you are doing everything right.
The lender or bank doesn’t have to agree to a short sale; if you have missed too many payments, they are more likely to refuse. That’s why if you cannot pay your mortgage, you must take the initiative to apply for a short sale before you start missing payments.
A Deed-in-lieu of Foreclosure
Finally, you can also attempt a deed-in-lieu of foreclosure agreement with the bank, which is when a bank accepts the property instead of going through foreclosure. While it is a better alternative to foreclosure, it still negatively affects your credit score and should be only used as a last resort.
Avoiding Foreclosure is Possible
When facing the foreclosure process, it can feel like the whole world is against you. However, with the mortgage relief processes listed above, you can avoid the catastrophic side effects of foreclosure and start over on a better foot.