If you are facing the task of how to stop foreclosure, knowing some details about your existing financial status will determine what options you have. Two people who have completely opposite financial circumstances will have completely different options to choose from. Some financial circumstances and the resulting options are outlined below.
If You Can Continue the Monthly Mortgage Payments and All Future Payments
If your current income allows you to continue making the monthly payments, but you are not able to make back payments you are in good shape. Below are your possibilities.
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Negotiate with the lender to modify the loan by paying a little more each month or increasing the term of the loan. Search for a better loan with a different lender in order to refinance the old mortgage. However, try to improve on your current situation with a better interest rate. Bring the loan current by paying missed payments as soon as you can. Use funds from family and friends, liquidating some belongings, or finding a second source of income. Then vow never to incur back payments in the future.
If Your Income Level Allows For Other Than the Full Monthly Payment
Bankruptcy can be a consideration in this circumstance. You would be asked to agree to a plan by the courts to pay your debts according to certain conditions. Bankruptcy may be a good choice for those who are in foreclosure proceedings and who have also accumulated a large number of debts.
This method will help you to organize your financial issues and assist you to stay in your current home. It is important to have an attorney to assist you with this option especially one that works primarily as a bankruptcy attorney. It can be handled on your own if you do your research and get expert advice.
If Your Income Level Does Not Allow You to Pay Any Amount on a Monthly Basis
Normally, due to an on going negative financial situation, it may not be realistic to try to keep you home and the quicker you admit this to yourself the better the end result will be. Looking at the situation in this manner will make it easier to leave the home and at same time get a new beginning with your financial affairs.
In some circumstances renting the property could be a viable option. This is especially true if the house could be rented for an amount that would cover the monthly loan payment. But always remember that a landlord has to pay some property expenses and also has the risk of the renter not paying on time or not at all. It would be best to discuss this option with the lender and get their approval.
Also if the house seems destined for foreclosure, it is best to try to sell the property through a real estate agent instead of letting the bank take ownership. You discuss this ahead of time with the lender since the home could be up for sale for quite some time.
If the market value of the house is larger than the amount you owe on the mortgage, you can pocket some cash and come out of the ordeal with a decent credit rating as well. You could then apply for a new loan with the profit as a down payment and purchase a more affordable home.
If the market value of the house is less than the amount owned, you may be able to refinance the remaining amount owed after settling the partial debt. This is called a "short sale" and must be approved by the lender since they are in possession of the deed. Basically, you hand over to the lender the amount you sold the property for and the lender accepts that amount as payment of the loan. Banks favor this process rather than foreclosure since they do not have to pay the legal costs.
The drawback of short sales are that they show up unfavorably on your credit report since the loan was not paid in full. Negative entries on your credit report in some cases can be overcome by using an attorney or debt specialist. But foreclosure will weigh more negatively on your credit than a short sale.
How to stop foreclosure can be achieved by using many techniques, but depends heavily on your current financial condition. The more options you explore the better your results will be.
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