Dealing with a home foreclosure can be extremely stressful, and it can also cause serious harm to your credit.
Thankfully, there are some alternatives to foreclosure that may help you get out of a financial bind.
Read on for a list of four ways you can get the help you need without going through the pain of home foreclosure.
1. Alternatives to Foreclosure: Short Sale
A short sale involves selling your home to a lender or investor for less than the amount that you owe. This short sale process can be quite time-consuming and requires you to get approval from your mortgage lender, but it’s still a better choice than foreclosing.
The bank must agree to accept the sale proceeds of your short sale in exchange for removing the lien on your property. You will need to get approval from your bank’s loss mitigation department before the transaction goes through.
When asking about a short sale, you will need to submit an application that includes your most recent financial statements including income and expenses. You’ll also have to show proof of income and submit your most recent bank statements and tax returns. In addition, most banks require you to sign a hardship statement or affidavit.
In many cases, you will be required to show that you have an offer from a potential buyer to complete the short sale. Most lenders require a current offer before they’ll accept your request for a short sale.
2. Sell Your Home for Cash
Another potential way to avoid foreclosure is to sell your home fast for cash. Cash buyers don’t need to go through the long process of financing, which means you’ll be able to make the transaction more quickly than a traditional sale.
Sell your house fast with a marketing service that specifically looks for cash buyers. Not only can this method help you avoid foreclosure, but it will also save you from paying a range of fees like realtor commission, legal fees, and more.
It’s important to note that if you sell your home fast for cash, you’ll need to make sure that you get an offer for the balance of your mortgage or higher. If you sell the home for less than you owe, you’re still responsible for paying your lender the difference.
One major perk to an all-cash sale is that you can list the home as-is, which means you can avoid making costly repairs. Just make sure that you know the value of your home and that you use a reputable marketing company to ensure a smooth, legal sale.
3. Mortgage Forbearance
Another of these alternatives to foreclosure includes getting a mortgage forbearance. This happens when your bank or mortgage lender lets you pause your mortgage payments for a short period of time. You may also ask to have the payments temporarily reduced.
Asking for a mortgage forbearance can help you while you undergo financial hardship such as a job loss or a family death. In most cases, you should not incur any additional fees or penalties, as well as any extra interest other than the regularly scheduled amounts.
You also don’t need to submit any additional documentation to qualify for mortgage forbearance. Simply contact your bank or mortgage servicer and let them know that this is what you need at the moment due to financial hardship.
It’s crucial to understand that forbearance doesn’t mean you won’t have to pay back your debts or repay your mortgage. You’ll still be financially and legally obligated to repay your payments over time, or when you decide to sell or refinance the property. Your lender should contact you about how to repay any missed payments before the forbearance period ends.
4. Deed in Lieu of Foreclosure
If you cannot handle your current mortgage debt but also don’t want to foreclose, a deed in lieu can be another good alternative. This option means that the lender will take over the title of the property so that you’re relieved of the mortgage debt.
Your mortgagor will deed the home back to the lender in exchange for the release of all financial obligations you currently hold. This process must be done voluntarily and in good faith by both yourself and your mortgage servicer or bank.
This alternative to foreclosure is viable, but it’s usually only chosen as a last resort when you have already tried other options like a loan modification or a short sale. However, it can save you time and expensive foreclosure proceedings that can be quite stressful and expensive.
If you decide to ask for a deed in lieu of foreclosure, you must relinquish the property and give it back to the lender. You will need to be prepared to move out and relocate once the process is complete.
While this can seem overwhelming, it may still be a better option if you’re unable to handle your current debt. Performing this alternative to foreclosure will relieve you of the loan so that you can move on.
Which Option is Right for You?
If you’re struggling to pay your mortgage, keep these alternatives to foreclosure in mind. Whether you hold a short sale, ask for forbearance, or sell your home for cash, there are many ways you get out from under a mortgage without foreclosing and ruining your credit.
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