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Examining You Foreclosure Alternatives
Author David Schneider | Nov 26,2007
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Foreclosure can be a traumatic experience. One minute you’re living the American dream in your very own home. The next minute, for one reason or another, you are unable to keep up with your payments. The experience of loosing your home may feel like everything you’ve worked for has come crashing down around you.
How Foreclosure Works
First, understand that each state has its own laws that decide how the foreclosure process will be carried out. There are some similarities in procedure that most states share.
When the loan becomes delinquent, you are then in what’s known as default. The loan typically remains in default for ninety days. During this time, the lender communicates with the homeowner in an attempt resolve the situation.
If the homeowner is unable to unable to retain the property, then it could be sold by auction. In many cases, the homeowner is forced to move after the auction.
Options to Foreclosure
The first thing a homeowner facing foreclosure should do is decide whether they want to keep the property. If the owner decides not to, he can sell the property before the mortgage forecloses. This could be an important step to keeping a foreclosure judgment off your credit record. The homeowner’s credit history is intact allowing him to obtain a loan in the future. Another bonus to selling the property is that the owner could benefit from the home’s equity. When the home is sold, the owner can pay of the mortgage debt and keep whatever is left.
Filing Bankruptcy
Borrowers facing foreclosure also have the option of filing bankruptcy. There are two main types of bankruptcy. Chapter 13 Bankruptcy can allow a homeowner to keep his primary residence while he pays off the debt. On the other hand, Chapter 7 Bankruptcy removes any debt the owner had left under the mortgage.
Bankruptcy has very serious consequences and should not be taken lightly. It can cause serious credit damage. A bankruptcy will remain on a credit report for at least 10 years. You should consider consulting with a bankruptcy expert before making a decision.
A Temporary Indulgence
A temporary indulgence is when the lender agrees to stop a homeowner’s payments for an agreed amount of time. The stipulations of this type of agreement are that the payments will be brought up to date when the temporary indulgence agreement ends. In most cases, the homeowner will need to be able to provide proof of the situation causing an inability to pay the mortgage in order to qualify.
Mortgage Forbearance
An agreement where the mortgage lender decides to reduce or halt the homeowner’s monthly payments for a certain period is known as forbearance. In order to have a lender consider offering the borrower forbearance, there must be an excellent payment history for the mortgage.
Mortgage Modification and Refinancing
Mortgage modification allows the homeowner to renegotiate the terms of the loan with the existing lender. Things like the interest rate or extending the mortgage term are examples of Mortgage Modification.
When a homeowner decides to refinance the existing loan, he is getting a new loan and a new lender. This may not be a wise route for an owner in financial distress since it could make matters worse.
Even if your property has gone into foreclosure, there are many options available. Lenders are usually willing to work out a plan to help homeowners to keep their homes.
Foreclosure can be a traumatic experience. One minute you’re living the American dream in your very own home. The next minute, for one reason or another, you are unable to keep up with your payments. The experience of loosing your home may feel like everything you’ve worked for has come crashing down around you.
How Foreclosure Works
First, understand that each state has its own laws that decide how the foreclosure process will be carried out. There are some similarities in procedure that most states share.
When the loan becomes delinquent, you are then in what’s known as default. The loan typically remains in default for ninety days. During this time, the lender communicates with the homeowner in an attempt resolve the situation.
If the homeowner is unable to unable to retain the property, then it could be sold by auction. In many cases, the homeowner is forced to move after the auction.
Options to Foreclosure
The first thing a homeowner facing foreclosure should do is decide whether they want to keep the property. If the owner decides not to, he can sell the property before the mortgage forecloses. This could be an important step to keeping a foreclosure judgment off your credit record. The homeowner’s credit history is intact allowing him to obtain a loan in the future. Another bonus to selling the property is that the owner could benefit from the home’s equity. When the home is sold, the owner can pay of the mortgage debt and keep whatever is left.
Filing Bankruptcy
Borrowers facing foreclosure also have the option of filing bankruptcy. There are two main types of bankruptcy. Chapter 13 Bankruptcy can allow a homeowner to keep his primary residence while he pays off the debt. On the other hand, Chapter 7 Bankruptcy removes any debt the owner had left under the mortgage.
Bankruptcy has very serious consequences and should not be taken lightly. It can cause serious credit damage. A bankruptcy will remain on a credit report for at least 10 years. You should consider consulting with a bankruptcy expert before making a decision.
A Temporary Indulgence
A temporary indulgence is when the lender agrees to stop a homeowner’s payments for an agreed amount of time. The stipulations of this type of agreement are that the payments will be brought up to date when the temporary indulgence agreement ends. In most cases, the homeowner will need to be able to provide proof of the situation causing an inability to pay the mortgage in order to qualify.
Mortgage Forbearance
An agreement where the mortgage lender decides to reduce or halt the homeowner’s monthly payments for a certain period is known as forbearance. In order to have a lender consider offering the borrower forbearance, there must be an excellent payment history for the mortgage.
Mortgage Modification and Refinancing
Mortgage modification allows the homeowner to renegotiate the terms of the loan with the existing lender. Things like the interest rate or extending the mortgage term are examples of Mortgage Modification.
When a homeowner decides to refinance the existing loan, he is getting a new loan and a new lender. This may not be a wise route for an owner in financial distress since it could make matters worse.
Even if your property has gone into foreclosure, there are many options available. Lenders are usually willing to work out a plan to help homeowners to keep their homes. |
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