We get it - stuff happens. And here is the common event sequence on how people loose their home:
Become ill or lose your job (or mortgage adjusts significantly higher)
Fall behind on monthly payments
Once you’ve missed 3 mortgage payments lenders can file NOD
And begin foreclosure proceedings
How to Keep Your Home and Avoid Foreclosure
If you fail to make your mortgage payments each month, your bank or mortgage lender may take action to repossess your home. After all, it’s not technically your home until you’ve paid the mortgage in full. Until that time, you AND the bank own the home. So if you don’t hold up your end of the bargain, the bank could come knocking. And the news won’t be good! The legal proceeding is known as a “foreclosure,” and will result in the loss of your home, foreclosure fees, additional legal fees, and possibly a deficiency judgment if your outstanding liens exceed the current value of your home. The main reason you might want to avoid foreclosure is your credit will be hurt when all is said and done.
But you can try to save your home in a number of ways.
Once you hit the 90-day late mark, the bank or lender will send a Notice of Default. The NOD essentially states that you have 30 days to make the payment current, appear in court, or face the risk of a foreclosure.
If 30 days go by and you fail to appear in court or make your payments current, the court can schedule an auction to sell your home within 7 days.
If the auction ends without a buyer, the bank or lender will gain ownership and likely perform maintenance on the property, clear up any title issues, then put it on the market.
After paying legal fees, foreclosure fees, late fees, and losing your home, you’ll be hit with a huge ding on your credit report.
A foreclosure will drop your credit score dramatically and prevent you from borrowing from A-paper banks for many years to come.
So if your lender did not offer you a forbearance (This is basically a special payment plan the bank/servicer sets up with the borrower to either lower payments or suspend payments so you can continue paying your mortgage.), or you are not able to refinance into a better loan due to your financial situation - the next thing you can do is to contact a cash buyer like Easy Outs Homes who can purchase your home fast. And since the time might not be on your side in this case - selling your house fast for cash is a great option for you. This way you don't leave your house to the bank and your credit stays intact. And once you are able to get yourself in a better financial position you can purchase another home to live in.
You can't really do this with a foreclosure on your record as your credit will hit a dip. And it stays on your credit history for 7 years.
There are other options to avoid foreclosure too:
A refinance may lower your payments and get you back on track. But you will need to qualify and exhibit the ability to make the payments. Some borrowers were able to take advantage of the Home Affordable Refinance Program (HARP) despite having underwater mortgages, but it required borrowers to be current on their home loans.
Your bank may also be able to save you from foreclosure by putting you on an interest-only home loan or a shorter-term ARM to lower the monthly mortgage costs. Ironically, these will reset in the future and could land you back in a tough spot. However, it would buy you some time to get back on your feet.
A forbearance plan is a payment plan set up by your lender/servicer to ease or even suspend payments until you are current again. It can be helpful if you’re simply experiencing a temporary hardship.
A partial claim allows the mortgagee to advance funds to the mortgagor (the borrower) in the form of a promissory note. So long as you are not delinquent over 12 months, HUD may grant you a partial claim (for FHA loans), which will bring your mortgage payments current. It is essentially a second mortgage behind your existing lien that collects no interest, and is not due until you pay off your first mortgage or sell your home.
A pre-foreclosure sale, such as a short sale, will help you avoid a foreclosure, but unfortunately at the cost of selling your home, likely for much less than it’s worth. It will also ding your credit in the process. But it could lessen the blow, and help you avoid any deficiency judgments after the fact.
Another option is a deed in lieu of foreclosure, which allows you to sell your home back to the bank that financed your mortgage. It is a great way to avoid foreclosure proceedings, but again results in the loss of your home.
It must be voluntary, and both parties must act in good faith. The bank/lender must buy the property for at least fair market value, but will usually not proceed if that value exceeds the existing liens.
Foreclosures also negatively affect neighborhood values - for each foreclosure that occurs nearby property values will drop about 1.5%, if multiple foreclosures take place in a small area the impact can be even greater.
Also if you want to avoid unnecessary attention to your situation selling to a cash buyer like Easy Outs Homes might be the best option for you. Get a no obligation cash offer for your MD house by filling a simple form here.
