Falling behind on your mortgage payments can be one of the most disastrous mistakes any aspiring homeowner can make. Most lenders start foreclosure proceedings by filing a NOD (Notice of Default) after just a few months of skipping mortgage payments, and before you know it, your house can be taken away. It gets even worse when the official auction date is set, and it seems impossible to save your home. Luckily, there are a few tricks you can use to put a halt to the foreclosure process and save your home and credit rating:
1. Restructure Your Loan
Due to many factors, you may no longer be able to pay the mortgage payments as required by the initial contract. If you act fast, you can get in touch with the lending company before the missed payments accumulate, explain your situation, and request for a renegotiation of the mortgage payments. Since most lending institutions try to avoid foreclosures, they are usually willing to work with the homeowners to come up with a better payment plan. Restructuring can be in many forms depending on the lender, but it generally involves an extension of the loan term to have lower monthly payments.
2. Organize your Finances
After your basic needs, the next item on your list of monthly payments should be your mortgage payments. You need to do all you can including drastic lifestyle changes to get enough to cover the monthly mortgage payments. Other debts like hospital bills, IRS debts, student loan payments, credit cards, among others can wait. You can adjust your monthly spending by cutting back on any unnecessary expenses. If you are unable to crunch the numbers, consider hiring a professional credit counselor in Elmont, NY to assess your situation and advise you on the way forward.
3. Ask for a Forbearance
Forbearance is when a lender agrees to temporarily suspend or reduce your mortgage payments for a short time. Before a forbearance can be approved, lending institutions will need evidence showing that your financial difficulties are only temporary or that you expect a large sum soon that will help you make all due payments. You will be required to provide your lender with bank statements and other important financial documents so that they can evaluate your financial situation. Depending on your unique situation, they may agree to reduce your payments for up to 18 months or allow you to skip a few payments over a 1-2 year period.
4. File for Bankruptcy
Bankruptcy should be tried after all other tactics have failed. This is because it can damage your credit score for up to ten years. However, it is one of the most effective ways to stop foreclosure proceedings as the lender can’t foreclose if your bankruptcy is pending. Once you file for bankruptcy, federal law prohibits debt collectors from proceeding with collection activities. Since foreclosure is regarded as a debt collection activity in Elmont, NY, the foreclosure is stopped for a while when the lender is notified that you filed for bankruptcy. This can buy you precious time to come up with a plan to save your home.
5. Short Sale Option
Your lender is obligated to consider any offer you receive on the house before the set date of the auction. If the offer is reasonable, the lender may go for it as it saves them the expenses, effort, and time of finding a buyer for the house. You need to be aggressive and smart in seeking a buyer then convince the lender why they should allow the short sale. In some cases, the buyer may assume your loan if all parties are in agreement.
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