Whether you’re struggling to meet your financial obligations and are thinking ahead, or have been threatened with foreclosure by your lender, there’s little else in this world that will send you into a tailspin. In this guide, we aim to equip you with all the knowledge you need to start taking action to regain a sense of control over your future.
Before we get into that, pause and take a deep breath. Breathe. We promise things will get better from here and because we know this is a fear for a lot of people, know that no one is going to turn up to force you out of your home. You’ve got time to sort this until your home is in someone else’s name. You’re safe. Now let’s take a look at your options so you can work toward a brighter future.
We’ll focus on ways to avoid foreclosure in this article, but we highly recommend you familiarize yourself with what foreclosure involves so you don’t feel like you’re trying to find your way in the dark. Here are some of our best resources:
It’s not too late to stop foreclosure until your home is sold to someone else. Here are your options:
The first thing you should consider and try to negotiate is loan modification. Loan modification is where your lender, upon hearing about your issues, tries to help by giving you some other options. While you may see your lender as the enemy (and they can feel like it sometimes), the foreclosure process is expensive for them, too. Their goal is to not lose money, and if they have to foreclose on your home, they’ll lose a lot of money.
Your first step should be to call your lender (or contact their Loss Mitigation department through their contact form or email) and explain your situation. Don’t feel embarrassed – they deal with this every day. Your lender should offer you a few ways you can get your mortgage payments back on track, if you’re able.
(Note: if you can afford it, do your best to prioritize your mortgage payments and forgo others you cannot afford – there’s help available to you to help you pay for utilities, find transport to work, and feed your family, but no one will pay your mortgage. Here are some links to help you find help for the above:
Your lender may offer you a short payment holiday or reduce your monthly payments.
We’ve somewhat covered forbearance in the section above, but we’ll cover it separately here. Forbearance is where your lender agrees not to move forward with foreclosure provided you agree (and stick to) a payment plan. They are legally held to this agreement.
Bankruptcy has been somewhat demonized in our culture (go bankrupt in Monopoly and you’re out of the game for good), it’s not the worst thing you can do for yourself. While bankruptcy certainly won’t do your credit score much good, it can stop a lot of legal proceedings against you, including foreclosure on your home.
Chapter 13 bankruptcy will give you the most time to give your proverbial train back on track, though Chapter 7 will also offer you some time, though it won’t stop your home from being sold. If you have other debts that have gotten out of hand as well as your mortgage, we highly recommend contacting a bankruptcy attorney to discuss your options. (They usually offer free consultations.)
A short sale doesn’t prevent you from having to sell your home, but it is a good way to reduce your bad debt if you’re trapped because your home is worth less than the money you owe on the mortgage. This isn’t common now, but it happened a lot during the financial crisis.
A short sale is not a guaranteed way to move on, since your lender must agree to it, but here’s how it works:
Say you bought your home for $400,000 with a $50,000 downpayment, meaning you borrowed $350,000. Due to increasing crime rates, negative press, and a shooting on the next road over, your home is now appraised at $280,000. You still owe $320,000 on the mortgage. Your lender may agree for you to sell at $280,000, losing them $40,000, but allowing you to sell the house.
Note that there’s no way for you to recoup your down payment investment in a short sale. A short sale will have a negative impact on your credit score, but it’s minimal compared to foreclosure, usually causing a drop of about 125 points.
Provided your home is worth at least the money you owe on the mortgage, you can sell your home. This is the best option if you don’t believe you can (or don’t want to) find a solution to staying in your home, as it allows you to keep control of the sale and move on your terms. If you haven’t yet done much damage to your credit score, you’ll also be able to protect it.
If you decide to go this route, tell your lender, as they’ll usually delay foreclosure to give you time to sell. (This is usually about 6 months, but it varies.)
You can sell via a realtor if your home will sell quickly on the market, but if you need to sell it in “as-is” condition, or just want to leave the stress behind ASAP, a cash buyer is what you need.
If you’re looking to move as soon as possible to avoid foreclosure, we can help. We buy homes in Massachusetts for cash, meaning we can complete the sale in just 2-3 weeks. We buy homes in “as-is” condition meaning we won’t ask you to do any repairs before we buy. All you need to do is reach out to us with a few details about your home and then we’ll send you our best, no-obligation cash offer. If the offer looks good to you, we’ll move forward with the sale. If you want to try another option to sell or keep your home, you’re free to do that, too.