Homeowners that fall behind on mortgage payments or that are experiencing financial stress often think that foreclosure is inevitable. The reality, however, is that there are a number of things that homeowners can do to avoid foreclosure.
Going through a foreclosure is stressful, overwhelming, and generally an awful experience for homeowners. Not only will you lose your home in a foreclosure, but if you owe more than it’s worth, you could still owe a deficiency amount. Additionally, it hurts your credit score and can be an embarrassing and difficult process.
Given the many downsides to foreclosure, Birmingham homeowners should avoid it whenever possible. And the good news is that there are things you can do to avoid foreclosure before and after receiving a notice of default (NOD). Here some tips to guide you through the process.
Ways to Avoid Foreclosure Prior to Receiving a Notice of Default
If you’re falling behind on mortgage payments, it’s a good idea to be proactive about dealing with the issue. You’ll have more options prior to receiving a NOD, which is a public notice that a borrower is in default and that initiates the foreclosure process.
It can be tempting for homeowners to try to avoid the problem, either out of fear, embarrassment, or hopes that things will improve. But it’s in your best interest to avoid this temptation and proactively deal with concerns of falling behind on your mortgage payments.
Communicate with Your Lender and Explore Loan Modification Options
Generally, lenders do not want to go through the foreclosure process. They would prefer to work with borrowers to come up with a way to keep them on track with payments. There are a number of reasons that borrowers fall behind on payments – from losing a job to having a health crisis and medical bills. Lenders are used to dealing with these issues and have options to help borrowers get back on track.
It’s important to keep in mind that there are plenty of loan workout options including forbearance, a repayment plan, refinancing, spreading out payments over a longer period of time, issuing a separate loan, and changed terms. As soon as you realize there is a problem, communicate with your lender and start working out a plan to stay on track with payments.
Find Ways to Get Extra Cash
This might seem like an obvious yet impossible solution, but it’s an important one that shouldn’t be overlooked. If you’re falling behind on payments, you clearly need more cash, and there are some things you can do to get it.
First, look at your budget and figure out what you can cut out of it. Maybe it’s cable, eating out, or a gym membership. Maybe you need to cut some grocery expenses, find more affordable healthcare, or even sell a car. This can be hard to do but freeing up some extra cash could be all it takes to stay on top of payments.
Second, consider ways to earn extra cash. This could be through selling furniture or other items, working overtime, finding a side gig, or even getting a second job. Again, this won’t be easy but finding some short-term ways to earn some extra cash might help you avoid foreclosure.
Avoiding Foreclosure after a NOD
Homeowners have fewer options after a NOD is issued, as generally, the notice gives a specific period of time for homeowners to get up to date on payments, including costs of initiating foreclosure proceedings, in order to stop the process. That said, there are still ways for homeowners to avoid foreclosure.
The first thing to consider is again talking with your lender. While they’re less willing to develop a workout plan once the foreclosure process has been started, you still might be able to come up with a plan that works. If you can’t do that and can’t come up with the cash, your options include:
- Selling your house – one good solution for avoiding foreclosure is selling your home. If you can sell it for more than what you owe, this can be an effective way to avoid the many issues associated with foreclosure.
- Negotiating a short sale – if you owe more than your home is worth, consider a short sale. A short sale means that your lender will lose some money, so you’ll have to negotiate the deal with them first. While a short sale will impact your credit, it lets you control the process, means there’s less wait time, and lets you avoid the stigma of foreclosure.
- Deeding the house to the bank – signing a deed in lieu of foreclosure basically means that you hand over the deed to your house and the bank releases you from debt, even if you owe more than the home is worth. Many lenders are not willing to accept this option, but in some cases, it gives homeowners another option to avoid foreclosure.
- Filing bankruptcy – when you file bankruptcy, all creditors have to immediately stop debt collections. This includes mortgage lenders. That said, once the process is underway the bankruptcy trustee will just work as a mediator to work out repayment terms with creditors. This means that filing bankruptcy basically just gives you some extra time and postpones any foreclosure actions.
Foreclosure is a terrible process that homeowners should avoid whenever possible. If you’re struggling to make mortgage payments on your Birmingham home or concerned about foreclosure, contact Home Buyers Birmingham. We buy houses as-is for cash, and we can close in as few as seven days.
Don’t worry about foreclosure or what the process might involve. Instead, contact us and get a fair cash offer for your home. Call us today at (205) 687-0604 or complete our online form to get started.
Home Buyers Birmingham
1821 11th Avenue South Suite #55331
Birmingham, Alabama 35205