Avoiding Foreclosure: You Have Options
Have you missed several mortgage payments or been faced with a Notice of Default? Losing your home may seem unavoidable. Luckily for you, there are several options that can help you save your home from foreclosure. And keep you and your family safe. And the roof over your heads secure.
A foreclosure occurs when your mortgage company repossesses your home when you have not been consistent on mortgage payments and/or have infringed upon the conditions of your loan.
Avoiding Foreclosure: Options
A short sale is viable if the housing market has deflated. And if you find a buyer before your home auction. In the event your home is market valued less than the remaining principal you owe, you can plead the bank for a short sale. Selling your house for less than what you owe. The bank will have to agree to this because the loan is secured by your home. The benefit to this option is the bank may forgive your outstanding balance. The key is to convince the bank to not report this to credit agencies. If you are reported, the IRS might consider the forgiven balance as income and you may have to pay income tax on said forgiven balance.
Bankruptcy effectively buys you time to regain financial responsibility. This does not free you from having to pay back your creditors and mortgage company. It merely freezes the foreclosure process. When you file for bankruptcy, collection activities are prevented by federal law. Foreclosures are considered collections because the bank is repossessing your home. When you go to court, a deal must be worked out between you, your creditors, and your mortgage company. The deal is to devise a payment strategy to assist you to recoup your remaining debt.
Deed in Lieu
A deed in lieu means you are signing the deed to your home back to the bank of your own free will. Though this may sound like a viable option, it has the same effect on your credit score as does a foreclosure. Regardless, it is quite difficult to proceed with this option because lenders are hesitant to accept for several reasons. Primarily, lenders want to avoid possibly being sued by homeowners. Homeowners claiming they had a lack of understanding of what a DIL implied. However, if you are approved, the lenders will need to fork up the money for home equity lines of credit. And be confident your dire financial situation is legitimate. If your lender allows you to proceed with this option, they are also guaranteed you are not falsifying your financial situation.
The only way to qualify for a DIL is if you are entirely unable to sell your home:
- You have few or no junior loans/leans
- Can prove your monetary struggles
- You begin the necessary steps of your own free will.
When faced with foreclosure, you may find yourself in a sticky situation because of the “due on sale” clause typically found in most mortgage contracts, whereby upon signing your contract, you agree to completely pay off your loan at the time of the next sale. If your lender agrees, they can delete this clause from your contract and allow the buyer to adopt your loan. You may also be able to bargain with the buyer to use their down payment to cover your remaining loan balance.
For this option to work, their down payment and monthly rent need to be substantial enough for you to pay off the remaining difference of the monthly loan amount and afford to live elsewhere.
At Bartifay Law Offices, we have finanical lawyers ready to assist you with foreclosure and provide you with options you may have with your particular case. Call us today today for a free assessment.