Understand Your Options To Avoid Foreclosure
Foreclosure is the legal process of having your home taken away from you legally because you cannot keep up with the rent or mortgage payments. It affects homeowners in different ways, depending on how much they owe and when the foreclosure happened. It's important to know what types of actions can help prevent foreclosure and ways To Avoid Foreclosure in 2021.
Mortgage forbearance was a great option for homeowners during Covid 19, who are/were struggling to pay their mortgages. It allows you to postpone paying your mortgage payments to avoid foreclosure temporarily.
While in forbearance be sure to monitor the value of your home, and make sure you have enough equity to sell, and walk away with some cash. I would not recommend waiting until your home is upside down (owing more than it is worth) please start talking to real estate and financial professionals the moment you go into forbearance.
Below the chart shows the percentage of home mortgages in forbearance is decreasing, which is good news for the housing market's health, bad news for the folks waiting for the real estate bubble to pop.
So, what does that mean people trying to avoid foreclosure? Over the past year real estate has changed, chances are your home's value has gone up dramatically. Have you been living in your home for a while? The mortgage payments you've made over time have hopefully chipped away at some of the balance of your home mortgage. If your home's current value or equity is higher than what you currently owe on your home loan, you may be able to use that increase to your advantage financially.
To find out what your house is worth in today's market, work with a local real estate professional or get a close estimate to try the home valuation tool below. We'll be able to give you an estimate of what your house could sell for based on recent home sales of similar homes in your area. Since home prices are still appreciating, you may be able to sell your house to avoid foreclosure and pocket some cash in most cases.
Check your Home Value to see if you have equity:
Many homeowners who have been facing the prospect of foreclosure often ask themselves if they should sell their house and move elsewhere instead of using a loan modification option. Sell your house to secure your future and buy a new place is an option worth considering. Still, before you make any decisions, it's essential to understand the process and potential risks involved in selling your home for equity.
There are many alternatives available for those who find themselves in a precarious situation - such as using an affordable loan modification program or negotiating with the lender. There are also legal actions that you can consider if you believe your lender is acting illegally.
It is essential to know all of your options before moving forward with this situation. The good news is that alternatives are available to help you avoid going through the foreclosure process.
There are many ways to avoid foreclosure. One of the good things you can consider is to make sure your home is worth enough equity to sell it outright. Even if you don't have enough equity in your house, there are other options before taking out a mortgage loan.
A loan modification is a renegotiation or refinance
Lenders and mortgage companies often offer to loan modification and refinancing options that can help people struggling with financial hardship. You might qualify for a more significant loan amount, lower interest rate, or a shorter term. However, many borrowers don't know these options exist and aren't aware of the implications of accepting them.
Deed-in-lieu of foreclosure, Give the bank your home instead of foreclosure.
A bank offering a deed in lieu of foreclosure is an option that allows homeowners to hand over their properties to their lenders instead of filing for foreclosure. This option comes with some advantages like no court case and the lender saving money on legal fees; however, this option also comes with disadvantages like not getting back any equity.
Short sale The bank forgives some of the balance to allow a sale of the home.
A short sale is a legal process that allows the bank to forgive some of the balance of your mortgage to enable you to sell the home. The buyer gets this discounted amount so they can purchase the house. This option relieves you from extreme financial strain, but it might take time for it to happen because banks can take their time approving such requests. Short Selling should be navigated by a knowledgeable real estate agent and a short sale/real estate attorney.
Reinstatement Make the loan current, pay the missed payments, interest, and penalties.
Avoid foreclosures by understanding your options. Reinstatement Make the loan current is one of the options homeowners have when facing foreclosure. It allows them to reinstate their mortgage payments or keep them current, so they are not faced with a loss of their home.
Reinstatement is easier said than done, though. If you want to make the loan current, there are some essential steps you need to take before filing your petition. If you don't do these things, the lender will likely deny your loan, and you'll risk losing your home.
The first step in reinstatement is to contact your lender. Many lenders offer free consultations to their struggling customers that can help get them back on track by providing them with options for repayment plans and forgiveness programs.
Can you sell and keep some equity?
Before you make any moves to avoid foreclosure, check if you have equity in your home. If you still have some equity that can be used, then consider selling your home and use the cash from that sale to buy another property.
The main option for avoiding foreclosure is selling your home for more than what you owe on it. To accomplish this goal, you must be able to sell the house within 90 days of your loan being due. There are other options such as refinancing or selling your home in a short sale which may be easier and quicker than selling it for more money and waiting on the equity.
There are many things to consider, for those who want out of their mortgage, and into a new home. Maybe, If you have equity in your house, you may be able to sell and move away from the old mortgage/forbearance and remove any liability for the loan.
Once you are out of forbearance, and you are ready to buy. Now most lenders will want to verify income and look at how many months ago you exited your forbearance agreement. This can vary, especially from state to state and lender to lender.
Best way to find out when you can start the home purchase process after a forbearance is to talk to a LOCAL lender, a professional loan originator in the city that you want to buy in. Are moving out of state? Contact a real estate professional in the state you are moving to, and ask them for a suitable lender.
Please do not go this alone; you must talk to your CPA, financial advisor, real estate agent, loan originator, real estate attorney. They must be professionals in the financial and real estate industry. Using these professionals will help you with your decisions and get you up and running financially safely.
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