For many people, the thought of losing a home is their worst nightmare. After putting so much money, time, and love into converting your house into a home, it is demoralizing, to put it lightly, to face losing what you had previously considered a lifetime investment.
When facing such a harrowing possibility, it may be extremely difficult to find a bright side. If you do find yourself unable to pay your mortgage, selling your home in order to avoid foreclosure is a great way to make the best of a terrible situation. By preventing foreclosure, you ensure that you are in the best situation to buy a home in the future, meaning that the loss of this home is but a temporary setback in your plan for home ownership.
Losing one’s home due to foreclosure has a multitude of long-term detrimental effects that extend beyond those associated with losing the property itself. Foreclosure means that you may be rendered unable to own a home again for years or even decades to come.
In this article, we offer tips for avoiding foreclosure, as well as some of the reasons why selling a home in order to avoid foreclosure is an excellent idea.
1. Avoid a Massive Credit Hit
There are few things worse for a person’s credit score than losing one’s home through a foreclosure. While paying your credit card bill late may decrease your credit score by as much as a whopping 100 points, foreclosures generally cause a score to lower by up to 300 points, ensuring that, even if your credit was previously a perfect 850, it will be left in a dire state after the foreclosure. As a result, foreclosure effectively prohibits you from obtaining a mortgage or even securing a rental property for a significant period of time.
While selling one’s home may initially feel like admitting defeat, selling a property in order to avoid foreclosure means that this setback is only temporary. By maintaining a reputable credit score, you ensure that you will be able to purchase a home again in the future, rather than having to work a lifetime in order to return your credit to pre-foreclosure levels.
Furthermore, a reputable credit score ensures that you will have no difficulty finding a rental property in the interim period while also making it possible for you to procure loans for such things as businesses, automobiles, boats, etc.
2. Use Your Time Effectively
In general, it takes about a year from the first missed payment before a home is foreclosed upon, while it usually takes under two months for a home to sell. By using this time effectively and working with your mortgage brokers, you can protect your credit score while preventing further financial loss and even pocketing some money that you can use toward future home equity.
It is essential, therefore, to pay attention to due dates and all notices from your mortgage lender. While you may renegotiate your mortgage payments, refinance, or even get extensions to meet your financial obligations, you can actively work toward selling your home.
Remember, that, while it does usually take under two months for a home to sell, some homes can stay on the market for much longer. Thus, it is essential that you work with your mortgage lender to make all possible effort toward selling your home during that time period, using their guidance to ensure that both you and your mortgage company are in as best a financial state at the end of this situation as possible.
3. Keep in Contact With Your Lender
While your mortgage lender is probably the last person you want to talk to when facing a foreclosure, they can actually be your best friend at this difficult time. Remember, your mortgage company’s primary goal when you are having difficulty paying your mortgage is to avoid losing money—thus, both you and your mortgage company benefit from avoiding a foreclosure.
Mortgage lenders will work with you to restructure your loan, negotiate more affordable mortgage payments, and secure any loans needed in order to make major home repairs. By contacting your mortgage lender, you may even be able to avoid losing your home altogether.
Contact your lender as soon as possible once you know that you will miss a mortgage payment. Respond to all attempts at contact and maintain a friendly relationship in order to achieve the best end possible when facing a potential foreclosure. Just be sure to get a second opinion before making any major decisions, either by meeting with a real estate attorney or contacting a local housing counseling agency.
4. Save for the Future
By selling your home pre-foreclosure, you will likely be able to walk away with some money to show for the equity that you put into the property. By maintaining your credit score and some of your equity while avoiding an outstanding debt, you can ensure that you are in the best possible position for owning a home again in the future.
If you have followed our advice and kept in contact with your mortgage lender, chances are also good that your mortgage company will work with you again when you are ready to secure another home loan.
Remember, if you fear losing your home to a foreclosure, first contact your mortgage lender before falling behind on bills, if possible. Second, plan ahead to sell your home in a timely manner, either on the open market or, particularly if time is pressing, to a real estate agency that will buy your home as-is. Third, ensure that you are able to sell your home or renegotiate with your mortgage company before your foreclosure date.
Fourth, plan ahead for the time when you will once again be able to become a homeowner.
Losing your house is a terrible prospect to face, but by avoiding foreclosure this loss can be but a temporary setback. By following these tips, you will increase your chances of becoming a homeowner again in the future.