My home is my castle as the saying goes can have a new meaning in times of financial instability. If you are experiencing some troubles paying the bills due to some unexpected circumstances in your life (health problems, sudden job loss, divorce, etc.) you might delay your mortgage installments and end up losing your home due to a foreclosure. This, however, is not the end of the world but just a lesson to learn from, especially if you follow some of the advices below.
What is a mortgage foreclosure and how to avoid it
Mortgage foreclosure is often referred to as judicial foreclosure and basically means that the deed can be closed only via a court action. When you start delaying the payment of your mortgage installment the lender starts taking action according to the number of belated days. After about two weeks you might be approached by a representative with a proposal of a repayment schedule that suits you better. In a month time they will start with collection attempts and if the payment is delayed more than 90 days you will be served with a foreclosure. In order to avoid that you have some options:
- The most obvious one is to renegotiate your mortgage payment plan with the lender or to remodel the loan itself. This will give you some time to catch up with the late installments and continue paying on time.
- Agree on a short sale – the lender may agree that you sell your home for an amount which might be less than the one you owe. The lender takes the money from the sale and forgives the rest.
- Get alternative financing – another option is to get a loan by the so called “hard money” lenders. These are private lenders who are willing to finance people who are faced with foreclosure or other financial troubles, however at quite high interest rates. You should consider all pros and cons prior to taking this step and it might be a good idea at this point to consult a foreclosure attorney and see if the foreclosure won’t actually be a better option out of the financial situation you are in.
What are your options when served with foreclosure
One of the most important things when it comes to foreclosure is that it is a complex process, which has its specifications that vary from state to state. An example of the significant differences is that in some states, like Kentucky the foreclosure is handled by the court, while in Georgia, for example, operates the “non-judicial foreclosure” rule – the lender can foreclose on your home without appearing in court before a judge. Therefore, in order to better know what will follow after you are served with a foreclosure and what options you have it is better to consult a local attorney with experience in the field. The attorney will be able to give you proper advice and assist you in the steps you can take. Just an example of the possibilities is that you can file for a Chapter 7 or Chapter 13 bankruptcy depending on your intentions. The difference in a nutshell before the two types of bankruptcy is that Chapter 13 gives you the option to keep your home and negotiate a 3 to 5 year repayment plan, while Chapter 7 mainly delays the foreclosure and protects you from owing too much tax after the property is sold. There are several requirements that a person should meet in order to qualify for filing either Chapter 13 or Chapter 7 bankruptcy and once again the best way to find an answer to your questions is to consult a local bankruptcy and foreclosure attorney.
How to get a new mortgage after a foreclosure
If you had to go through a foreclosure or bankruptcy process your credit score has suffered a lot. The fact will stay on your credit record for as long as 10 years, depending on the type of bankruptcy you have filed for. However, it doesn’t mean that you cannot get another loan or a mortgage to purchase a new home. There are several options that you can avail of.
- Repair your credit score – one of the first steps that you should take care of is your credit score. Find out what it is and take the necessary steps to improve it so that you can stand a better chance for a new mortgage. Some of the things that will surely help is paying your rent on time, depositing cash into your savings account regularly, getting a small loan that you repay by making the installments always on time and if possible even earlier than expected.
- Be patient and persistent – you should note that it will take much longer to get a loan or a mortgage after having gone through a foreclosure compared to the usual process. You should not give up though. But first, you have to be realistic about your current situation – are you financially stable, do you have any unpaid or forthcoming significant bills. A good sign for any potential lender is that you keep your job as it shows that you are trustworthy.
- Ask a family member for help – you can ask your relatives for some assistance. It can be in different forms. As a starter, if you have lost your home, you might be able to stay at their place until you get some financial stability and can rent your own home. The other type of help can be to be a co-signer of your new mortgage. Some institutions will require a family member to co-sign the mortgage agreement before giving you the money as an additional guarantee, especially if you have history of late payments.
- Find alternative financing sources – sometimes the usual funding institutions might not be willing to lend you money after you have declared bankruptcy or lost your home to foreclosure. Therefore you can find alternative sources such as peer-to-peer funding for example.
As a conclusion we should say that losing your home to a foreclosure or having to declare bankruptcy is definitely not the most pleasant experience in life, however it is not something that you cannot get through. Finding a reliable bankruptcy and foreclosure attorney is an essential prerequisite for going through this stage as quickly and painlessly as possible.