Having a forced foreclosure of your home can be a nasty experience, and almost everyone wants to avoid that. However, it can sometimes get seemingly impossible when you are beginning to miss your monthly mortgage payment.
Homeowners do not also want to consider the option of entering into a forbearance agreement with the lender, because they often believe it can backfire. This is true as it might be possible that after the forbearance period is over, the borrower might not be financially buoyant enough to make the payment, leading to a foreclosure.
A forbearance agreement and outright foreclosure can be avoided as you can choose from any of the options listed below:
A repayment plan is different from a forbearance agreement. When you enter into a repayment plan, it means you are informing your lender that you will be able to pay up the months oy have missed over time, while staying on the current payment. This means that your income must be able to cater to the monthly payment and the additional backlog you wish to spread over a couple of months. Most lenders allow this option of payment for either three, six, or nine months.
You can choose to reinstate your loan and all the other interests attached to it if you feel you have enough money to do so. Most times, the agreement between the lender and the homeowner usually includes this option, although it is only available for a specified period. In addition, most of the state laws available give homeowners some time to see if they can reinstate their loans and the interest and expenses attached to it.
A loan modification is another option that a lender can permit, provided the agreement works out well. It involves reducing the interest rate as well as extending the time of the loan payment. For instance, if what was in an agreement between the lender and the borrower was to make payment for 20 years, both parties can revisit this agreement and extend it to 25 or 30 years, with an interest reduction over this timeframe.
DEED IN LIEU OF FORECLOSURE AND SHORT SALE
If you realize that you do not have the money to make payment any longer, and there is no hope of bouncing back, you can consider these two options. A short sale allows you to list your home for sale at a lower price than the remaining loan balance. The other option is called “deed in lieu of foreclosure,” which permits you to deed the property over instead of awaiting the property’s foreclosure. Before choosing either of these options, you need to ensure that you agree with the lender, and a written deal is signed between you two.
Foreclosure is a bad experience that should be avoided as much as possible. You should choose any of the listed options, depending on what works best for your state. This will save you from the mess of forbearance or foreclosure.