The ongoing global pandemic has created tough financial situations for many American families with job loss, illness, and restructuring of companies across the U.S. When large numbers of jobs are lost, large numbers of foreclosures tend to follow.
Currently, there are safety nets like the CARES Act in place for many homeowners falling behind on their payments, but those safety nets won’t be there forever, and you still must act to qualify for help.
The last thing you want to do is get underwater on your mortgage and on the way to foreclosure but there are ways to avoid foreclosure. Let’s get an overview of ways to avoid foreclosure and the pros and cons of each so you’re better prepared if things turn south on your monthly payments.
Before looking at different ways to avoid foreclosure there’s a piece of knowledge you need – your lender does not want to foreclose either. Foreclosure obviously hurts the homeowner, but your lender loses money during foreclosure too. Don’t be scared to talk to your lender the minute you think you might be in trouble. They’ll look over your current situation and terms to help find alternatives.
Refinance your Mortgage to AVOID Foreclosure
Mortgage rates are constantly changing. If you first signed up for your mortgage at a high interest rate or with high monthly payments, you might be able to avoid foreclosure by refinancing your mortgage.
Current interest rates are at rock bottom as the housing market recovers from the coronavirus pandemic so if you’ve thought about refinancing – now is the time to do it. Refinancing is not the most common solution to avoid foreclosure since the differences in payments or interest are normally not enough to save someone in a tough financial situation.
Selling your Home to AVOID Foreclosure
It’s not ideal for every homeowner but selling the home is one of the most effective ways to avoid foreclosure issues. If you’re not too far behind on your payments, you might be able to sell right away but you’ll also need to make concessions to sell quickly. If you are selling your home to avoid foreclosure, call the Storck Team today. Fast sells to help avoid foreclosure issues are one of our specialties.
Unfortunately, if you’re facing foreclosure, you might not always be able to get the most value out of your home, but something is better than nothing – especially less than nothing. The best way to move your property quickly is through a short sale.
A short sale is when a homeowner experiencing financial hardship sells their home for less than what remains on the mortgage. In a short sale everyone including the borrower and lender take a small financial hit, but that hit is a better alternative to the large fees and headaches that come with foreclosure. In some short sale situations, you’ll be able to apply for a new loan and move into a new home immediately.
How to Avoid DEFICIENCY JUDGEMENT in Foreclosure
With short sales and other instances where the homeowner moves the property for less than it’s worth there is a deficiency. For example, a homeowner who owes $200,000 and sells their home for $150,000 has a deficiency of $50,000.
In some cases, a court will make the seller pay part of or the whole deficiency. Deficiency judgements are allowed in Colorado, but rare since they’re most often filed when the lender believes the borrower has more assets than they’ve indicated. The best way to avoid deficiency judgement is by not lying about your assets and taking your time on any official forms.
Mortgage Forbearance to AVOID Foreclosure
A mortgage forbearance is one the fastest and easiest ways to pluck yourself out of danger when money is tight.
A mortgage forbearance involves making smaller payments or putting your payments on hold, usually for 6-12 months. Forbearance is best suited for temporary hardships when you know the money will be back soon. At the end of the forbearance period your missed payments (with interest) will be due at once.
The CARES Act currently mandates lenders provide borrowers up to twelve months forbearance if they can prove COVID-19-related loss of income. Many companies are already ahead of federal rules and making accommodations for pandemic related hardships. A forbearance will ding your credit score but nowhere near the cost of foreclosure.
Mortgage Deferment to AVOID Foreclosure
Mortgage deferment and forbearance are often confused but they are two separate ways you can help yourself on mortgage payments. Deferment involves putting off (deferring) all payments for an agreed upon period, traditionally until the end of the loan period.
Because most homeowners cannot make a lump sum payment at the end of the forbearance period, they use deferment to make time to get back on track. Unlike forbearance, interest is normally not applied to the paused payments. It’s easier to be approved for deferment during the pandemic but you still must qualify with your lender.
Using Bankruptcy to AVOID Foreclosure
Most people believe bankruptcy is the last thing you want to do and while bankruptcy should be toward the bottom of your solutions list, it makes sense for many homeowners. When you declare bankruptcy a local court will issue a stay, which keeps creditors from continuing to collect your debt and can help you take different steps to try to keep or sell your home. Both bankruptcy and foreclosure are harmful to your credit score, but bankruptcy helps you set up for financial recovery much sooner.
More FORECLOSURE Help
There are many ways to avoid foreclosure, but certain ways are better than others depending on your financial situation. All the above options might hurt your credit score but it’s nothing compared to what foreclosure will do it.
Even a detailed article can’t delve into all the nook and crannies that come with foreclosure but if you need more info, The Storck Team is here to help. Whether you have questions on short sales, forbearance, or anything associated with foreclosure, The Storck Team will do their best to help get you out of trouble. Every day you don’t act you’re closer to the worst outcomes so call The Storck Team today.