The worst has happened and your bank is threatening to foreclose on your home. What is your job? This is a difficult time and you may not be able to think of possible options. You may think that all hope is lost and you will lose your home and ruin your credit. However, there are options to stop foreclosure and preserve your credit and possibly even your home.

1. Bring the loan up to date

Perhaps the best option, if you can do it, is to simply upgrade the loan. After all, that’s all the bank is looking for, as they want to keep receiving payments (and the interest on those payments) from you. If you upgrade the loan, the bank will almost certainly stop the foreclosure proceedings and your credit and your home will be saved. This should be your first choice, if possible, especially if you live in the house and want to keep it as your home.

2. Forbearance plans

A forbearance plan is designed to provide some short-term relief to borrowers who are experiencing financial difficulties that prevent them from paying their monthly mortgage payment. Under a forbearance agreement, the bank agrees to reduce or suspend your mortgage payments for a certain period of time to give you time to recover. For your part, you must agree to resume full payments at the end of the forbearance period, in addition to paying an additional amount to keep up with late payments (including interest, principal, taxes, and insurance). This can be an excellent option. if it is certain, your difficulties will only be temporary.

3. Sell your home to a cash buyer

If you know you need to get away from the home, you can often pay off your loan (plus some money left) by selling your home to a cash buyer. This could be a normal sale in the real estate market or it could be a sale to one of the many companies that offer to pay cash for homes in danger of foreclosure. These companies can often seal the deal within a week of your contact with them, because they act quickly. Most of them will offer you a cash offer within 24 to 48 hours and close the sale as quickly as they can (sometimes even on the steps of the court on the day of foreclosure).

4. Short sale

A short sale means that your bank agrees to accept an amount less than the total amount owed to avoid foreclosure. This involves finding someone who will buy your home for less than you owe and convincing your bank or lender to accept the amount you can get for the home. However, keep in mind that the phrase “short sale” does not mean that it will take place in a short period of time; The “short” in “short sale” means that you will be “short” of the amount actually owed. You will need to plan for this in good time to prevent your bank from foreclosing. This option is often better for your credit because it avoids foreclosure on your credit report.

5. Deed-in-lieu of foreclosure

A deed in lieu of a foreclosure plan is also known as a mortgage release. This is where you, the owner, voluntarily assign ownership of your property to the lender / bank. This gets you out of the mortgage without foreclosure and sometimes even gives you a relocation incentive to help you move to another home. Other options may allow you to stay in the home for up to three months without paying the rent, or to lease the home from the lender for up to a year or more at current market rates. This can be a great option if you are ready to move out of the house but cannot short sell it, because it allows you to keep foreclosure off your credit report.

6. Loan modification

If you modify the loan, you permanently restructure the mortgage so that the terms of the loan are changed to give you a more favorable repayment plan. The lender may agree to lower your interest rate, convert the loan from a variable rate to a fixed rate, or extend the life of the loan. To be eligible for a loan modification, you will generally need to show that you are unable to make your current mortgage payment due to some financial hardship or hardship, and make new payments regularly during a trial period to show that you can, in fact, make the new payment.

7. Bankruptcy

If you are behind on your mortgage without a realistic way to catch up, sometimes bankruptcy can help. In bankruptcy, you are allowed to pay the arrears (late and unpaid payments) on your mortgage for a period of time that could be up to five years. You must have sufficient income to pay your current mortgage payment, as well as the amount that the court determines to pay off your arrears. By making all of the required payments until the end of the payment plan, you can avoid foreclosure and keep your home.

Any of these options can help you avoid foreclosure, sometimes even allowing you to stay in your home. Foreclosure can be a nasty thing on your credit report, even worse than bankruptcy, and you want to avoid it at all costs. The most important thing is to talk to your bank / lender about your difficulties and try to work things out with them first. If you can’t find the best option, a loan modification, then you should start exploring other options.

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