All foreclosures have the same cause - missed payments. Financial difficulties come without notice. You may lose your job overnight, your business may no longer fight with the competition, or your spouse got sick and couldn’t work for a long time. Unemployment is dangerous for all debtors. Health issues are also a huge threat. For entrepreneurs, a tough competition may mean lower profit margins, which in turn forces them to take home lower salaries. Of course, most of us picture a future where incomes keep growing year after year. In reality, nobody can count on this scenario. So, be prepared to face a foreclosure. However, the good news is that foreclosures can be avoided.
You can get your house out of foreclosure in a few ways.
First of all, your lender may agree to allow you to stop making payments on your loan or to reduce the amount you have to pay each month. Demand a forbearance agreement. During that time, foreclosures cannot be initiated.
Secondly, you can refinance your mortgage. In this way, you can lower your monthly payments, although the cost of the new loan might be higher.
Another way to get your house out of foreclosure would be to file for Chapter 13 bankruptcy. When you initiate this process, the foreclosure stops.
Sometimes, lenders are open to loan modifications as well. It is vital to notify your lender as soon as you feel that you might not be able to make the payments on time or in full.
With these four measures, you may still keep the house. But when your income is low, you also have to spend less. Give up your wants and focus on your needs. However, don’t make an idol out of your house. There are far more precious things in this life that money can’t buy.
Finally, you can get your house out of foreclosure in two more ways which will also force you to move. A sign of maturity is to own up when you can’t make the payments anymore. Probably you’ve made the wrong choice when you bought the house. You went a little bit over your budget and at the first financial challenge, you lost control.
So you may ask your lender permission for a short sale, especially if you have the cash to cover the difference between the sale price and the outstanding balance. If you don’t succeed, you still have one more choice, though not all lenders are open to it. It’s called “deed in lieu of foreclosure” - the bank becomes the owner of the house and the mortgagor walks away free of any obligations. This is usually a measure of last resort, especially for people with bad credit scores.
Foreclosures are new opportunities. You can rebuild your life after a foreclosure and become a homeowner again. Don’t lose hope!