Are There Any Options?
There are options for people who are facing the possibility of foreclosure on their homes, but if you can't come up the necessary amount of money to cure the default, the options are few and, in many cases, undesirable. But depending on the circumstances, the undesirable options may be the only ones there are.
It doesn't matter what the reasons you have for not paying your mortgage, a foreclosure on your credit is damaging and long lasting. Once your home goes into default, you have to make decisions quickly as to how you are going to handle it. Although three to six months may seem like a long time, it really isn't. Once a bank starts the foreclosure process, the days roll by very quickly so there is little or no room for indecisiveness.
If you are having financial problems and the income is just not there, you have to ask yourself if you will be able to come up with the money to cure the default within the time frame your mortgage holder gives you to catch up the payments. If you are going through a temporary financial crisis and you know you can put your hands on enough money to catch up the back payments, you should do it as soon as possible. But if you can't see your way out of this crisis, there are ways to delay the foreclosure.
Many people file bankruptcy actions to stall the foreclosure proceedings and give themselves time to regroup and get their finances in order. Will filling for bankruptcy protection work for you? Filing for bankruptcy is by no means a guarantee that you will be able to keep your home. In essence, it may just buy you a little time to stay in your home.
The most common bankruptcy filings are Chapter 7 and Chapter 13. (bankruptcy) If you can pay court ordered arrearage payments along with regular contractual monthly payments. You have to understand that a bankruptcy does not necessarily relieve you of contractual responsibilities. How much you ultimately pay in monthly arrearage installments is decided by the courts. Many people who file for bankruptcy protection still end up losing their homes through foreclosure. Not only do they have a foreclosure on their credit history, they have a bankruptcy on it also.
Can you borrow the money to pull your property out of foreclosure? You can check with a family member or a close friend to see if they have some money put away that they can loan you until you get back on your feet. This is a serious request so you need to think about it hard before taking the money. Remember, it is a loan and you are expected to pay it back if they agree to loan it to you. When a friend or relative trusts you enough to loan you that type of money, you should be honored and make every effort to repay the loan. Set a time line to pay it back and try not to disappoint them. If you can't make a payment when a payment is due, call them and explain why you can't. Never let your friend or relative have to call you first about the money you owe them.
If you can't borrow come up with the money to catch up the payments, you can call your lender and talk to them. Be honest. Tell them why you got behind and ask to negotiate a reasonable, realistic plan to continue to make your regular monthly payments while paying back all arrearages. It is in the lenders best interest not to foreclose on you so they will listen and try to help you. If the lender agrees, you will be expected to live up to your end of the bargain. If you don't, they will not be willing to bargain with you again and they will foreclose.
Depending on the equity in your home, you may be able to get another loan by refinancing. Since your credit has been spoiled because of the late payments, you may have to get what is considered a hard money loan or a C or D paper loan. This is a loan with higher interest rates and less favorable terms. But it will give to the opportunity to keep your property and enough time to work towards rebuilding your credit score.
If you are honest with yourself about your financial situation, and you know you won't be able to continue making your loan payments, your best option may be to sell your home. If you sell the home before it is foreclosed on, the foreclosure will not go on your credit and lower your FICO score, although the late payments will. But late payments won't hurt your FICO score nearly as much as a foreclosure and/or a bankruptcy. By selling the property, even if you have to lower the sales price and walk away with nothing, you can always buy another home later when your finances are back in order.