How To Avoid a Foreclosure: 3 Tips

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If you are facing imminent foreclosure, you should first know that you are not alone in any way. There are thousands of individuals across the country on any given day who are under the same circumstances you are. You cannot afford to lose your home though, so you should know that foreclosure is avoidable, especially when you follow the three tips below.

1. Make Negotiations

When you secure a mortgage, you will be working with a lender or with a bank. The reason that foreclosures happen is that when you are behind on your mortgage payments, your bank needs to sell the home so they do not lose more money. Unfortunately, in many cases, banks still lose money as the house sells for much less than what it is worth after a foreclosure. Negotiating with your bank is possible as they will want to keep you as the homeowner if you can eventually come to good terms.

If you are not sure how to negotiate with your bank, contact an attorney who can provide foreclosure defense to you. You and the attorney can contact the bank together to discuss lower interest rates, lower monthly premiums, and even forgiveness of any balances that are past due. Most lenders and banks have a variety of options that are there and that are meant to help you be the homeowner when you are going through difficult times. They want to work with you, so do not be afraid to contact them about making arrangements for your home.

2. Contact a Hard Money Lender

If you believe that you have exhausted all options with your bank, consider a hard money lender. Often, when a foreclosure is about to happen, you will have a poor or a bad credit score on your hands. It may be hard to believe that someone would give you the money you need to get back on good terms with your lender when you have such bad credit. A hard money lender is someone who is ready and willing to work with you to help you keep your home though.

When you work with a hard money lender, however, you will have a very high-interest rate on the money that you borrow from them. They know that you are desperate, so they will offer you the money you need while knowing that you will pay back three times the amount you requested. It is important to note that you should not rely on these lenders for the long term due to the poor interest rates. Use them only as a short-term solution so you can get out of the difficult circumstances that are currently under with your home loan.

3. Have a Short Sale

The final way that you can protect your home is to have a short sale of your home. This is another option that many lenders and banks offer to you if you have another home to go to or if you do not think any other solution will work for you. Short sales typically allow you to sell your home for less than what is left on the loan. The bank or lender will receive all of the money from the sale to pay off your loan back in good standing and to help you prevent a foreclosure on your credit report.

When a foreclosure occurs, your credit score will sink much lower than it may already be. A short sale, however, will not have any effect on your credit score so that you can only work on building it back up over time. You do have to discuss this with your bank to determine if they are okay with a lower sale and to see if they are willing to take the money. Every lender is different on the terms that they require if you do choose to short sale your property.

Final Thoughts

If you are facing a potential foreclosure, it does not have to be the end of your world. You can avoid foreclosure by trying to negotiate better terms on your loan or even by having a short sale. If you need to stay in your property and your bank will not negotiate, contact an attorney or even consider a temporary loan from a hard money lender.