You have alternatives to foreclosure when you fall behind on your mortgage payments. Depending upon how much you are in arrears of your loan, gathering enough money to pay back missing mortgage payments, interest and penalties is the first place to focus if you want to keep the home.
You should communicate openly with your creditor to let them know your situation and that you want to find an alternative to foreclosure. You may be able to workout payment plans or other solutions that we discuss below. Most banks would prefer to avoid foreclosure proceedings.
For foreclosure prevention, family members, access to retirement funds, and other financial resources are the best place to start if they haven’t been depleted. If this option exists, you should consider asking your mortgage company for the opportunity to “reinstate” your loan to current status.
If you can get funds to pay the loan current, you would use the approach of Reinstatement. Reinstatement lets you pay back the past due debt as a lump-sum. Your lender would provide you with the payment amount which would include missed payments, interest, and penalties and give a deadline date to pay it.
Incident-Related Default:
If you fell behind on your loan payments due to an “incident” eg, an illness, loss of job, accident…and you will be able to eventually get yourself back to a place you were before, then seeking relief from creditors and working to stay in the home makes the most sense.
Atlanta lenders can negotiate a “short refinance” of your current loan where they would consider forgiving some of the debt and restructure the balance into a new loan.
Another option would be Forbearance . You can also ask for a period of forbearance from your mortgage lender where they will agree to reduce or suspend your mortgage payments until you are back on your feet. They would put the missed payments on the back of the loan most likely. This has been a wide-spread and successful approach during the pandemic to account for the economic disruption that lock downs and impacts of the virus have costs many homeowners.
Lifestyle-Related Default:
Often when facing foreclosure in Atlanta or anywhere in Georgia, you have already tapped other resources to stay afloat and there isn’t anywhere easy to turn to for assistance to make up missing payments and bring the loan current. If your income or employment are not going to quickly get you back to normal or what income you generate in the future won’t be enough to help you “stay” current, then options to pay and stay might not be the best approach.
If you want to stay, and have income but perhaps less than before, you can attempt Mortgage Modification. This is where you look to refinance your mortgage and/or extend the term. Your mortgage company might then reduce your monthly mortgage payments to a level that are more within your means. The key to a loan modification is your ability to show your lender that you are able to continue to make your payments…albeit lower payments reflecting your lower level of income.
If the ability to pay your mortgage for the foreseeable future is questionable, and you don’t expect to be able to get your income up to prior levels or at least generate some income to stay in the home with restated loan terms, then looking for a good exit strategy to sell your home and use the equity to start over and re-group make sense.
If your home can sell prior to the foreclosure action leading to you losing the home, you should. Listing your home with a real estate agent and selling it quickly is an optimal solution. The problem can be that if the home needs work, and/or you are relying on a buyer to close your sale before a particular timeframe…there is risk. What if the buyer doesn’t buy in time? Their loan falls through, the inspection goes poorly and the buyer terminates? These are risks that can lead to foreclosure even when the house is “under contract.”
Another main-stream option is to sell the home “direct” to a professional home buyer company like Resideum. These types of companies usually buy homes as-is and close quickly with cash or private money financing. They typically don’t offer full retail value, but they do offer a way that you can sell your house very quickly without making costly repairs, without paying real estate commissions, and with the certainty of a sale on your timeline. For someone trying to avoid a foreclosure in Atlanta, a professional homebuyer like this is a very viable option.
You can ask your lender to consider a “Short Sale.” This is where you are able to find a buyer for your home but the sale proceeds from selling it won’t cover the mortgage. You will need the lender to agree to accept “Less” than owed to let you sell the home. Banks will consider these types of sales but they can often take lots of time to get approved and often you can only be behind a certain amount and you will have to sell your home in a specific timeframe.
Sell to a Friend and Rent Back
If you can’t bear to move out, you could try to sell your house to a friend or an investor who will then lease the home back to you. You would sign a lease with affordable monthly payments and also negotiate the “option to re-purchase” the house at a later date. This gives you the right to buy back your home once your finances have improved. This option could work but you would need to get back into a position where you could get new financing and you would need to negotiate terms that you can live with for re-purchase price and timeframes. If you don’t re-purchase per your arrangement, you could end up being forced to move out when your lease expires.
Things that DON’T work well
Allowing the home to go to foreclosure is devastating to your financial situation, credit and psyche. Considering things like Bankruptcy to stop foreclosure likely won’t. Bankruptcy typically only “delays” the foreclosure. If you can’t recover in such a way to make the payments by reorganizing your debts, then a bankruptcy court will release the house from the bankruptcy action to allow the mortgage company to foreclose it.
Offering a Deed in Lieu could avoid the “foreclosure” on your credit report but the damage to your score will be essentially as bad regardless so this is simply a less formal, more dignified way to give the home back to the lender on your terms rather than theirs…and the sheriffs.
As with any type of matter that involves your Atlanta home, money and real estate, consider consulting with a lawyer to get proper legal advice and avoid running afoul of any laws that could do further harm to your credit score or create additional liabilities.
If you want to explore selling your home as-is to a professional home buyer and close before foreclosure date, reach out to Resideum today for a free consultation. We can get you an all cash, no-obligation offer you can consider today. Get in touch with us and together we can create a plan to solve your problem.
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