You’ve fallen behind on your mortgage payments. This time, it’s not just by a month or two, and you’re getting worried.
Though financial stress can be paralyzing, it’s always best to take action!
You may be able to save your home from foreclosure. If you can’t, you may be able to recoup most of the existing equity or at least avoid a total credit meltdown.
Here are four alternatives to foreclosure that may be useful if you’re having a tough time getting more mortgage current.
If you have been laid off or experienced other financial hardship, your lender may be willing to offer a modification to your current loan. By extending the terms, for instance, you can often bring down the monthly payment. The bank may also agree to lower the interest rate as a means to make your mortgage affordable.
This option is best if you expect a long-term hardship and you are not eligible to refinance. Your bank may require you to show proof that you’ll still be able to afford the new payment. If you are a two-income household and one partner loses their job, a loan modification may work because you can prove that you still have the income to cover a lower payment (even though the second income may be absent for a while).
You can also ask for a special forbearance, or suspension of payments. A special forbearance means your bank will offer a temporary grace period before your payments resume — so you still need to make a plan to get caught up. This is a good option if you anticipate being back to work within the next few months and in a position to get caught up.
If you lose your job or experience a pay cut, it’s best to request a forbearance before you fall behind. Yet, if you’re already behind and fearing foreclosure, you should still call your bank and ask about this option.
If you’re so far behind that you can’t get caught up, you’ll reach the point of a short sale before foreclosure is on the table. A short sale is a sale of the property where the lender has agreed to accept less in repayment than remains on the mortgage. In other words: you must be what is commonly known as upside down on your mortgage to choose a short sale.
Secondly, you must be far enough behind in payments that the lender doesn’t think a modification or a forbearance would be a reasonable solution.
A short sale has a few advantages to foreclosure. You can probably get a new home loan in as few as two years. The more serious stain of foreclosure could mean you can’t get a mortgage for up to seven years. Secondly, you have some say in the process. While the lender will also have to approve of any offer you receive, you’re not totally out of the loop.
If you’re not upside down on your mortgage, an all-cash offer from an investor may be your best way out. For instance if you bought a home for $350,000, you currently owe $250,000, but it’s worth $415,000 — it would be a shame to walk away from that equity because you’ve fallen behind on payments.
Getting a fair offer from a cash buyer means you get enough to pay off your mortgage and keep the remainder instead of surrendering it to the bank. If you’re in a pickle and foreclosure is on the horizon, working with an investor is often the best way forward!
The thought of losing your home is scary. These alternatives to foreclosure are always worth exploring, and you should get ahead of your situation as much as possible. If you’re about to fall behind or you are too far behind to modify your loan, call California Family Homebuyers today!
We work with all sorts of homeowners in Sacramento, and we can help you sell your property fast. We’ll give you a fair offer and we can often close the sale within seven days!
If you are ready to sell a home headed for foreclosure, we can help you with a stress-free home sale! You could receive an all-cash offer in just days. Contact California Family Homebuyers today by filling out this form, or give our office a call now 916-496-3737!