Below are 8 options that most homeowners have when their home is being foreclosed on. If you have any questions on any of these, please give us a call at 512-572-0021.
1. Bring the loan current
If you have money or can borrow from a retirement account, sell something to raise funds, or have a “rich uncle” or someone that can lend you money, you can bring your mortgage current to avoid foreclosure.
2. Loan Modification
Your lender may allow a permanent change in one or more of the terms of your loan to provide a lower payment via:
1) Interest Rate Reduction (for example, your interest rate may be reduced to 2% for 2 years, to 3% for 2 years, to 5% for remainder of loan, or something similar)
2) Term Adjustment (the lender may add more time to original length of loan to reduce your monthly payment)
3) Principal Adjustment (the lender may principal from loan to save interest, but that principal becomes a balloon payment at end of loan)
You may be able work with your bank or a mortgage broker to refinance the home with lower payments. Usually not an option if you’ve missed payments already and you will most likely need good credit, equity or some cash at closing.
4. Sell through Realtor or FSBO
You may sell the house through a licensed realtor or on your own, if you have some equity in the home. If there is no equity, then it may become a short sale, provided your lender agrees to that strategy.
5. Sell to Investor
A Real Estate Investor may be able to use creative financing to get you out of a tricky situation. It may be in the form of a short sale, but is much better than a foreclosure.
Also better than a foreclosure, bankruptcy is a possible option, if you can afford an attorney. Using this option should only put you in situation where it may take anywhere from 6-24 months to buy a home again.
7. Deed in Lieu of Foreclosure
It may be possible for you to just give the home to the lender and walk away. May not be possible if there are other loans or liens on the property. With this option, it could take anywhere from 48 months and up to buy a home again.
8. Do Nothing / Go through Foreclosure
This is the hardest option to recover from if you want to purchase another home soon. It could also damage your credit by 100 points and may take you up to 7 years to be able to buy another home.
The above is intended for informational purposes and is not to be considered legal advice. Please consult an attorney if you have any legal questions.