The idea of foreclosure can be terrifying. You don’t need to lose your home and personal belongings to personal debt. A foreclosure is not what anyone wants, and happens when conditions get out of control. Luckily, there are a number of options to help stop foreclosure.
When you are in financial distress, it can be difficult to see where to turn. It is not uncommon for personal or private loans to come with high interest rates and monthly payments that are too much for a struggling family. There are a few steps that you can take before it’s too late.
If foreclosure seems like the only option left, there are other ways out of this crisis. A lot of times when finances are in disarray, it is hard to get creative with ways to stop foreclosure due to stress, depression, and personal debt.
Fortunately there are experienced professionals and consultants at Door & Key who have worked with people in many situations that are uncomfortable, such as divorce, loss of job, or death of a family member. We are here to help you find a solution.
In this blog post, we will talk about 8 options that will help stop foreclosure so you can get back on track with your finances and breath easy again!
1. Personal or Private Loan
A personal or private loan can help stop foreclosure. Let’s talk about a private loan first. This is where you borrow from an individual, friend, or family member who may have more lenient terms than a traditional bank would offer, and who do not require a credit check. This option can be beneficial when you are not able to qualify for a personal bank loan from a financial institution (more on that below). In this case you can catch up on the mortgage late payments (also called arrears) and gain back control over the situation. However, obtaining a loan from an individual or family member could be challenging since it might mean opening up to them about your financial situation. Always be honest, transparent, and make sure you can easily afford the mortgage payments as well as the loan payments.
In addition, you can also apply for a personal loan from a bank, or lending institution, but be careful since they often come with high interest rates. This type of loan is not a good choice for people who are already in financial dire straits. This is because it requires you to borrow money that is expensive to pay back, and might mean borrowing more than once from that same institution (or another lender) which could potentially continue a cycle of debt and eventually put you right back in the previous situation of falling behind on the mortgage. Also, it can be hard to get a private loan if your credit has been impacted by high debt utilization or late payments.
2. Loan Modification
A bank may modify your loan in the case of a foreclosure, but it can be tough to get. In order to get a loan modification when in foreclosure, you need to prove that the reduced payments are affordable for your personal situation and that you have enough in savings to support future financial pitfalls. This is usually done through a monthly budget, which has to be approved by the bank and should include all of your expenses like food and housing.
Other things that must also be included in this type of modification: proof of employment or income verification; evidence of medical emergencies, and any other expenses that may have occurred.
If the bank approves your personal budget and offers you a loan modification, they will also require that you pay both an up-front fee as well as monthly payments on top of what is owed to reduce the interest rate or get some other benefit for the reduced amount.
Again this is hard to get, but worth exploring if you find that you can meet their requirements.
3. Rental – Become a Landlord
Another option to avoid foreclosure is to rent your property out to a tenant and become a landlord.
This is an option if you have the personal income and assets to cover the necessary expenses, while also catching up the arrears, and are willing to move out of the property.
If you have the wherewithal, and the property is not too much of a fixer-upper, then this may be an option for you. You can use extra cash flow funds from rent to pay off any personal debts or other financial obligations that are weighing on you.
Most importantly, if you are certain you can find a tenant, then this could be a great option. You will also need to learn how to become a landlord. In order to become a landlord, you will need to know the basics of property management, tenant screening, your state’s landlord laws, and maintenance requirements. Some drawbacks include not being able to collect rent for some time while you deal with getting the property rent-ready and rented (sometimes called holding costs). Make sure you conservatively and accurately map out all of these costs before choosing this option, since landlords who fail to do this often regret the rental property ownership experience.
4. Retail Sale
If you have enough equity, and there are not too many title issues on the property, you can list your home with a realtor and do a retail sale.
By doing this you can avoid paying the legal costs and fees that come with a foreclosure, as well as avoid having a foreclosure on your credit report. Keep in mind though, you will have to pay realtor commissions and fees and these typically cost around 6% of the sale price.
The downside is that you will have to wait for someone to make an offer, which could take months or years depending on the state of your home’s market which can be unpredictable. A potential buyer may also require additional repairs to be done on the property prior to sale.
Another alternative would be to list the property at below-market rates in hopes that you can find someone who is willing to make an offer. You will want to be sure you have enough equity to cover the difference in price.
5. Cash Offer
A cash offer is an option to avoid foreclosure if you have an investor willing to buy your home as-is, and you are willing to move in order to save your credit and potentially put money in your pocket.
A cash offer means you will likely trade some equity for speed and convenience, and you may not have enough equity in your home. However, it is still worth exploring this option to avoid foreclosure and save your credit since this option usually means the investor will pay all closing costs, title fees, and close when you need. Cash offers on homes are not new. You will find that this option can save you a lot of time, and fees that come with other avenues of selling a home.
6. Subject-To / Creative Financing
Subject-To/ Creative Financing is helpful because a buyer or investment firm (such as Door&Key) can take over your mortgage payments, agreeing to faithfully make them on time each month, so that you can move to another place without having to suffer through the process of foreclosure or eviction. With this option, buyers will also typically give you cash to move and assist you in the transition process. In addition, this option can save your credit from ruin if you are underwater or have fallen behind on personal bills since it will stop the foreclosure and catch up the late payments. You do not need to take out another loan and can avoid banking fees as well.
Keep in mind there is risk with this option since the investor does not have the mortgage put in their name, and you do sign the deed over to them. This means that the debt remains in your name, for some period of time. However, when going with this option credible investors typically have a long term interest in faithfully making the payments on time since they have to pay a substantial amount out of pocket in order to catch up the arrears, renovate the property, and market it to an end buyer or renter. This means the motivation to make on time payments is high, since most buyers utilizing this strategy will not want to lose their initial investment.
Also, there are terms and conditions with each bank when it comes to switching your deed to another person, and you will want to check while exploring this option, and work with an experienced investor.
7. Renovation Agreement
A renovation agreement is where you will partner with an investor to renovate the property, then list and sell. The investor will take a profit, and you will be able to save your home from going into foreclosure. During the renovations, you may need to find a new place to stay while work is done.
Investors may want to do this if they see the value in renovating your home to make a profit. A renovation agreement with an investor is a good option if you are not able to pay your mortgage and want to avoid foreclosure but where there is not enough equity in the home for a cash offer.
Bankruptcy is an option, but it does not stop foreclosure permanently – it typically only delays it. However, bankruptcy can help buy time by pushing the foreclosure date off. This is typically a strategy to use when you want to attempt a short sale or loan modification but where there is not enough time between the current date and the foreclosure auction date. This option will usually pause foreclosure until the court proceedings are over. It can also stop all debt payments during the bankruptcy process. However, once the proceedings are done the mortgage debt will remain and homeowners can often find themselves back in foreclosure when the bankruptcy filings are completed since many loan modification attempts are declined or denied.
Bankruptcy is only an option if you have no other way to avoid foreclosure, and it should always be the very last option considered. Sometimes it is unavoidable when things get out of hand, but you will still need to deal with the foreclosure unfortunately.
Learn How Door & Key Can Help You
You can reach out to us at Door & Key and speak with one of our experienced consultants to help stop your foreclosure, or explore possible options for you in your time of need. We will ensure that the option you choose is best for your situation, goals, and needs. We take a consultative and holistic approach while working with you.
We’ve helped people in many situations, from cash offers to helping with foreclosures. We also provide, financial consulting, credit counseling, and can help with relocation assistance.
Call or fill out the form on our website and one of our experienced consultants will be in touch with you shortly to talk about how Door & Key can help you if you are facing foreclosure.
When you’re ready to talk about your situation confidentially, we are here for you. Call today (833) 387-7433 because it is never too late.
Disclosures: None of the above information should be taken or construed as legal advice or tax advice. Please consult with a licensed attorney or CPA for any additional necessary information.
Foreclosure, Bankruptcy, Cash Offer