By law, agreeing to and signing a mortgage means that you have obligated yourself to pay the loan amount back to the lender in full amount, and you have agreed to do so per their terms. When you discontinue making payments, you have breached the contract and can be stuck facing foreclosure.
The lender, as a result, can use their right to possess your home to try to recover the investment. The procedure of them reclaiming your house is called foreclosure. You usually do not need to worry if you are behind on payment by fifteen days or less. However, if you do not pay for ninety days, you can generally expect foreclosure proceedings to begin.
The entire process can take anywhere from 2 to 12 months. This gives you ample time to fight against it and maximize your chances of remaining in your house. If you wish to slow down the process, use the tips below.
The first thing you should do when facing foreclosure is to gain knowledge about what is taking place. Take a deep breath and read everything you have obtained from your lender, including the mortgage itself. This is because many initial notices contain information regarding foreclosure prevention options.
Next, you will want to educate yourself about how foreclosure is handled in the state you are living in. This helps you to figure out how much time you have to find a solution.
Call Your Lender
Contact your lender as soon as possible. Foreclosure is a very costly and time-consuming process. So, your lender will probably want to work with you to come to a solution rather than reclaim your home. Willingness to work together and honest communication will go a long way in order to bring you back on steady ground. Many times you will have the option to:
- Take on a new loan with new terms and interest rates.
- Reset the repayment plan as per your budget.
- Forbear your loan.
- Change the amount due, length, interest rate, and monthly payments of current loan.
Consult a HUD-Approved Housing Counselor
If you have talked to your lender but need further guidance, you can talk to a housing counselor who is HUD-approved. There are federally-funded agencies in every state that work with several lenders to safeguard reasonable repayment selections for struggling homeowners.
The counselor will have a look at the details of your situation as well as aid you in figuring out the options. However, you must be aware of fraudulent foreclosure assistance agencies.
File for Bankruptcy
Filing for bankruptcy will eliminate or reduce your debt but will impact your credit extremely adversely as well. The moment you file for bankruptcy, an automatic stay is enforced on your assets, which hinders collections and temporarily halts the process of foreclosure.
Consider Doing a Short Sale
If you are positive about not being able to repay your mortgage, even with repayment plan or loan modification, a short sale can be a good option for you. Unlike a traditional sale, in short sale, the lender may agree to settle for less than the value of your house. The bank is also in charge of selecting which offer to accept.
This way, even though you will end up losing your home, you would not have to go through foreclosure and its effects on your record.