You’ve come across hard times and it just seems like there’s one thing after another to deal with. Maybe facing illness, divorce, job loss, or a death in the family. Whatever the case may be, you could be at risk of losing your home because you can’t make your mortgage payments. The prospect of foreclosure is terrifying. Regardless of your financial situation, it’s important to remember that you have options. Here are five important things you should know to help you face foreclosure.
1. You aren’t alone
Being in a position where you could lose your home feels overwhelming. But you don’t have to face it alone. About four percent of mortgages in the U.S. are delinquent. This means that millions of Americans struggle to make payments on their mortgage, and probably some of them live in your neighborhood.
If you think this is purely a reflection of a strong economy, think again. Mortgage delinquency rates are still higher than pre-Recession of 2008 levels. While it won’t change your daily burden, it’s important to remember that getting behind on a mortgage is a common problem, and you aren’t the first person to deal with it.
2. You have options
You may not be aware of it, but help is available. You should start by contacting your lender as soon as you know you have a problem. It helps you to work with them so you can keep your credit intact and work something out. The foreclosure process isn’t easy on anyone, let alone the lenders. Remember, they don’t want you to default. They’d much rather work with you and get paid than take your home outright. Contacting them first will give you the best chance at knowing your options and working out an arrangement.
In general, it costs lenders $50,000 to foreclose on a property. Not exactly a small chunk of change. That, on top of any improvements, repairs, and updates can be costly. Some things lenders may be able to offer you instead:
- Loan modifications. The lender may be able to adjust your interest rate or repayment term, making the loan more manageable for you.
- Refinance. If you have good credit, you may be able to get a refinancing loan to repay your current mortgage. You’d get approved for another loan at a lower interest rate, making it easier to pay back. You’d need enough equity and a good credit score to make this happen.
- Repayment. Your lender may be able to have a repayment plan adjusted for three to six months You will have to continue making payments on your overdue mortgage but the length of the new repayment plan depends on the borrower and how much is delinquent.
- Forbearance. This option can provide temporary relief and put a pause on your payments. The deferred payments will be tacked onto the mortgage at the end of your loan.
3. A short sale or deed-in-lieu aren’t good alternatives to foreclosure
When you have a “short sale” you end up selling the house for less than you have on the mortgage. Once the sale is complete, the lender could still try to collect the remainder of the mortgage from you.
With deed-in-lieu of foreclosure, you sign away the rights to the house and give it to the lender. Once again, you could still be on the hook for the remainder of the mortgage.
These situations are not ideal and clearly not resolutions for the issue. There’s a lot of information out there promoting these two options, but there are two important facts you may not know about.
- Foreclosure, short sale, and deed-in-lieu have a similar impact on your credit rating and stay on your credit report for the same amount of time.
- If you are in a dire situation, foreclosure will let you stay in the home the longest amount of time.
In short, if they all affect your credit the same and you can still be on the hook for the mortgage, a short sale or deed-in-lieu are poor alternatives to foreclosure.
4. You can get free housing counseling
If you’re having an issue with your mortgage you may feel like you have to throw money at an agency to help you understand your situation and options. There’s no need to spend money out of pocket though. The Department of Housing and Urban Development (HUD) offers free housing counseling to struggling homeowners. Check out the Homeowner’s Guide to Success: What to do if you can’t pay your mortgage for a good starting point.
You can also contact your regional HUD office to seek help and get free housing counseling. A counselor can tell you if there are any programs to help you out. Also, be aware of scammers who may try to take advantage of a foreclosure situation. Read up on the matter in Protecting Yourself from Opportunity Hunters and Frauds.
5. Selling for cash could be best
Selling your home is not an easy or short process. Regardless of market conditions, the time it takes for inspections, appraisals, and other administrative steps can be too long when your credit is on the line.
If you lost your job or are dealing with an ugly divorce and just want to wash your hands clean of it, there are people who will buy houses with cash. If you’ve exhausted all options with your lender and foreclosure is imminent, selling for cash may be your best bet.
The good thing with this option is that these buyers will buy your home as-is, in cash. There is very little hassle and things can be expedited, so you can move on with your life.
This is where Sundae can come in and help. Our specialty is working with buyers who need a little help and want to get the highest price on their home. When we buy houses, we assess the advantages and risks and offer the best price possible. You don’t have to worry about showings or time-consuming processes. We’ll take care of it. We also offer $10,000 in cash advances to help you move and get settled.
If you’re facing foreclosure, it can seem like the end of the world. It’s a stressful situation for sure but know that you are not alone and focus on what you can control. You can sell for cash and get the best offer to make the most out of this situation. You want to work with people you can trust and have your best interest at heart. You’re not just a number or a profit and we know that.
Want to learn more about Sundae? Call us today at (800) 214-4426.
Sundae’s co-founder and CEO, Josh has a history leading companies that operate at the intersection of real estate and technology. Prior to Sundae, Josh was Founding Partner and SVP of Sales at LendingHome, and before that, he was Co-Founder and CFO of Purpose Built Investments. Josh graduated with honors from Stanford with a BA in Economics, BA in Spanish, and an MA in Latin American Studies with a focus in Economic Policy.