Are you facing foreclosure? You know you’ve missed several mortgage payments, but you just can’t seem to get back on track. Your mortgage payments seem to be getting away from you.
And then, it happens.
You get a foreclosure notice. And the realization hits you—you’re going to lose your home.
Before you panic, you need to decide what you want to do. The path you take depends on whether you want to stay in the home or move.
Take a deep breath. Relax. It’s going to be okay.
There are three basic stages of the pre-foreclosure process: you go into default, your lender shows intent to foreclose, and your home goes up for sale at auction.
You can technically be in default if you miss just one mortgage payment. Many lenders don’t consider a payment late until after the grace period has ended. However, serious action is not usually taken until there have been 90 days of delinquency.
If your due date and grace period pass without a mortgage payment, your lender will likely charge a late fee and send you a warning. If this happens two months in a row, you may get a demand letter requesting you make up the missed payments or legal action will be taken. You’ll be given some time to come up with the money.
Once you miss three mortgage payments, your bank may issue a notice of default, signaling their intent to initiate the foreclosure process. At this point, you still have a chance to address your delinquency and reinstate your loan. However, after 120 days without payment, your lender can legally begin foreclosure.
The court will get involved with your mortgage default if your lender pursues a judicial foreclosure. This is where your bank files a lawsuit against you to repossess your house. Your lender may also have to prove you were offered loss-mitigation options before they filed a lawsuit in court.
You have the right to contest the foreclosure and offer your defense. A judge will review evidence on both sides and possibly hold a hearing. You might even be able to agree to a plan with your lender before the hearing begins. But if no settlement is reached, and the court rules in the bank’s favor, your property can be sold.
A non-judicial foreclosure can move much faster. If your lender pursues this option, they will seek out a foreclosure trustee to move forward. Depending on your state, the bank may only be required to give public notice in the newspaper. If you want to contest a non-judicial foreclosure, you have to file a lawsuit against the lender.
A notice of trustee sale will be recorded with the county that includes details about your property as well as the place, date, and time of the sale. The sale must be advertised for a few weeks before the event. The trustee sale is usually done through an auction at the sheriff’s office.
The highest bidder (or buyer most likely to close) will be awarded your home. If there’s no buyer interest, the bank will use other methods to try to sell your house at a later date. Either way, your home is now officially foreclosed, and you will likely be evicted by the new owner or the lender.
First and foremost, your lender is there to help you, especially if you want to stay in your home. He or she doesn’t want you to lose your house any more than you do and is willing to provide options as they relate to the mortgage.
Most of the time, not being able to make a mortgage payment is the result of a temporary problem in your life like the loss of a job or an illness. There may be options available to help you keep your home such as forbearance, a loan modification, or a repayment plan to catch up on past due payments. Set up a meeting with your lender first so they can give you all the options available to you.
Filing for Chapter 13 or Chapter 7 bankruptcy will impose an automatic stay on your assets and pause the foreclosure process. However, your credit will be severely impacted.
With Chapter 13 bankruptcy, you’re placed on a repayment plan to pay off your late payments, but you get to keep your property. You must have enough income to afford both the late payments and current ones. The plan usually lasts three to five years.
Chapter 7 bankruptcy eliminates your debt and allows a court-appointed trustee to sell your nonexempt property to pay your creditors. A low income is required to qualify for Chapter 7. The process takes around four to six months, then the court will discharge the remaining debt.
Also, with Chapter 7 bankruptcy, if your home was already scheduled for a foreclosure sale, filing will likely postpone the sale for three to four months. However, the lender can file a motion to lift the automatic stay and proceed with the sale.
Here’s some good news: there’s one more option if you do not want to file bankruptcy or go through a foreclosure.
Sell your home.
But, wait, can you sell a house in foreclosure?
Until the time your home is sold at auction or the bank takes possession, your house is considered to be in pre-foreclosure. If you hire a real estate agent, they can crunch the numbers to determine how much money you could get for your home and if that would be enough to pay your debt.
Your lender may agree to a short sale because the foreclosure process is such a headache. A short sale is when your lender lets you sell your home for less than you owe. Taking this route means you would avoid foreclosure and bankruptcy—plus your credit would not take a huge hit.
If it has become too much to maintain or you have found yourself in a situation where you can’t pay for it, selling your home for cash might be the best option. It offers two results: you no longer have that huge mortgage to pay, and you can downsize to something more affordable – all without hurting your credit.
When you sell your house for cash, you can sell your home faster than a market listing. This alleviates the headache of the traditional process of selling a home – listing, showings, inspections, and more. At New Again Houses®, we buy houses for a fair cash offer. We'd love to help you find freedom from your old home.
The good thing about pre-foreclosure is that you can prevent foreclosure at just about any step in the process. Though your credit score will likely take some hits because of the late payments, it won’t be nearly as damaging as a foreclosure.
Here are ways to get out of pre-foreclosure and stop foreclosure.
You can catch up on your missed payments and get out of default. You’ll also be required to pay for penalties and late fees. Your regular payments will be expected on a normal schedule.
Your lender may be able to work out a loan modification with you. This could involve lengthening the term, deferring part of your payment, shortening the rate, or making it easier for you to pay in some other fashion.
A deed in lieu of foreclosure means your lender now owns the home, but you are absolved of the debt. Your credit score won’t be hit as hard, but you’ll still be evicted and lose your home.
In a short sale, you sell your home for less than what you owe the bank. Many lenders will go along with this strategy because foreclosure takes a lot of time and money. Your credit will be okay, but you still don’t have a home anymore.
When you fall behind on a certain amount of mortgage payments, your lender can begin taking the pre-foreclosure steps that will ultimately end with the loss of your home, but there is still hope.
If you are facing foreclosure and you absolutely can not afford to keep your home, you can sell your home during the pre-foreclosure process and avoid foreclosure. New Again Houses® can make you a fair offer and close quickly. Contact us today!