What Birmingham Homeowners Need to Know About Pre-foreclosure
If you’re struggling to make mortgage payments or dealing with a financial crisis, the thought of facing foreclosure can be scary and overwhelming. When you’re in this situation, it can be tempting to avoid the issue and hope that it will go away.
Unfortunately, this is the worst thing to do. Instead, homeowners that are facing foreclosure need to be proactive about understanding the process and knowing what their options are. To help Birmingham property owners navigate this process, here’s an overview of the first stage of the foreclosure process: pre-foreclosure.
What Is Pre-foreclosure?
As you might guess from the name, pre-foreclosure is the first step in the foreclosure process. It notifies homeowners that they are in default and warns that the lender is beginning the foreclosure process.
Pre-foreclosure starts when a homeowner is in default because of missed mortgage payments. For most borrowers, this occurs after three consecutive missed mortgage payments. When a borrower is in default, the lender issues a Notice of Default, which is a legal notice that lets the borrower know that the lender has started the foreclosure process.
Pre-foreclosure officially begins when the homeowner receives a notice of default and it ends when either an agreement is reached between the lender and borrower or when the property is foreclosed.
What Is the Difference Between Pre-foreclosure and Foreclosure?
To foreclose upon a house, lenders need court approval. This can take months and even years. In contrast, pre-foreclosure begins simply with missed mortgage payments and issuance of a Notice of Default.
The key difference between pre-foreclosure and foreclosure is that during the pre-foreclosure period, borrowers have options. The foreclosure process is long, time-consuming, and expensive for banks.
They’d prefer to avoid the process whenever possible. Because of this, during the pre-foreclosure period, borrowers can negotiate with banks and try to find ways to either stay in their houses or avoid foreclosure.
While it sounds ominous, pre-foreclosure isn’t as scary as it seems. During this period, borrowers still have lots of options. As a result, homeowners should view it differently than being in foreclosure and appreciate that it’s more of a warning period that ideally enables homeowners to avoid foreclosure altogether.
What Should Homeowners Do if They’re in Pre-foreclosure?
If you’re a Birmingham homeowner in pre-foreclosure, the first thing you should do is evaluate your options. As daunting as it might seem, the reality is that you actually have lots of options at this point. Here are a few to consider:
- Get current with payments. This might be difficult to do, but it’s important to remember that at this stage in the process, you can avoid foreclosure and stay in your home if you can get current on mortgage payments.
- Negotiate a mortgage forbearance with your lender. This is essentially a pause in mortgage payments and usually involves a repayment schedule. Because foreclosures are expensive and time-consuming, lenders are generally willing to negotiate some sort of forbearance and repayment plan.
- Refinance your home. If you have built up substantial equity in your home, you might be able to refinance to get current on payments and set up a long-term plan that will work for your current financial situation.
- Accept a deed in lieu of foreclosure. If you don’t think you can work out a plan to stay in your home, you can consider a deed in lieu of foreclosure. This essentially means you vacate the property and the lender receives the deed to the property. If you’re considering this option, it’s important to review all terms because in some situations lenders can still seek reimbursement for losses after you’ve vacated the property.
- Sell your home. One way to avoid foreclosure is by selling your property. In many cases, this would be a short sale, meaning the house sells for less than you owe on your mortgage. However, most lenders are willing to approve a short sale because it lets them avoid foreclosure. You’ll need to communicate with your lender, but this can be a good option to avoid being foreclosed upon.
The key takeaway here for homeowners should be that you still have options during the pre-foreclosure period. Communicate with your lender, learn about options, and be proactive about avoiding foreclosure.
Need to Sell Your Birmingham Home Fast?
If you’re concerned about foreclosure or have fallen behind on mortgage payments, we can help by buying your Birmingham home. We pay cash for homes and can close in as few as 7 days after you’ve accepted our offer. We buy homes as-is, regardless of the condition, and pay all closing costs and fees.
Contact Home Buyers Birmingham online or at (205) 687-0604 to get your cash offer.
Home Buyers Birmingham
1821 11th Avenue South Suite #55331
Birmingham, Alabama 35205
