Here are five alternatives to foreclosure that can help you!
It’s better to understand the alternatives to the foreclosure process before you get involved in the real estate market. It’s important to talk about it since it is an important subject and crucial process in Real Estate.
Before we discuss the alternatives to foreclosure, let’s discuss what foreclosure is.
What is Foreclosure?
The means by which your lender can take over your home is foreclosure, and in that case, you are not allowed to live in that property.
When does foreclosure happen?
Usually, a person loses their home when they fail to make their mortgage payments (or the homeowner fails to pay their property taxes), and the lender or mortgage investor must recoup the equity and then place the home on the market for sale. Losing your home is the worst nightmare imaginable for anyone who has spent their lifetime saving for the residence. No one wants to come across a situation like a foreclosure.
Hence, we have created a comprehensive guide to help you understand the alternatives to foreclosure. You should definitely check if you qualify for any of these. All aboard!
The five alternatives you should check on are:
- Partial Claim : The first option is a partial claim. The conditions to be eligible for the partial claim are:
- Having an FHA loan
- Meeting HUD’s guidelines It is an interest-free loan and can be a good option for eligible homeowners.
- Pre-foreclosure sale : Pre-foreclosure sale allows you to sell your home in a lesser amount. An alternative to this emotionally devastating and financially ruinous situation can be this strategy.
- Special Forbearance : Special forbearance is a relief for borrowers. You can call it a process to delay the foreclosure process. This is a special case that occurs in particular circumstances. Those circumstances can be sudden financial issues or a burden on the homeowner. Some common circumstances are :
- Unemployment
- Death of co-borrower
- natural disaster damages
- Injuries or illnesses
- Various other emergencies In that case, the lender can also share a repayment plan with the homeowner. If the homeowner can pay the amount after a specific period decided, then the lender should not initiate the foreclosure against the homeowner.
- Mortgage Modification : In case the mortgage plan is not manageable, then you can modify it according to your convenience. This option can help you reduce monthly pressure and will help you get some more time. But you will be eligible only if you confirm that you do not have any problem with the newly modified payment plan and have no financial burden. One point to note is that this may increase the total loan amount you were supposed to pay.
- Deed-in-lieu of foreclosure : Deed-in-lieu of foreclosure is probably the last option if all other options fail. It’s not an option to save your home but can help you with your credit score. A few points you should note are:
- Deed in lieu of foreclosure (agreement instead of foreclosure) is a document that the homeowner signs. A notary public notarizes it, and a public record is kept (this also depends on how the process is handled in their area).
- It should be kept as a last option after trying all other options mentioned above.
- This option is beneficial for both owner and lender. The property title will be transferred from the owner to the lender, but it will help you avoid a negative impact on your credit score.
If you are facing issues in paying your amount, the best option is to discuss the same with your lender. Try to find one of the best options you can think of from all the possible cases mentioned above. Discussing all possible options will help you a lot to avoid foreclosure.
Usually, lenders accept the alternatives to foreclosure as they can be beneficial to both lenders and homeowners. So don’t feel frustrated by thinking about the situation and try to contact your lender to save your castle. All the best!
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.
