Over the last year, the Federal Reserve has rapidly increased interest rates in an effort to slow down inflation in the U.S. economy. An increase in Federal Reserve fund rates impacts mortgage rates, credit cards and personal loans.
This sudden increase in rates has created challenges for many homeowners who for many years were able to buy and sell homes with ease. Now the tide is turning and many homeowners are facing one of their biggest financial challenges — how to stop foreclosure and prevent the bank from taking your property.
Don’t let the bank foreclose and leave you with nothing. You do have options and below are seven ways you can avoid foreclosure.
Let’s review each option – how it works and the pros and cons of each method:
If you need to refinance, you don’t have to rely solely on your current mortgage lender. There are many different lenders in today’s marketplace who offer a myriad of creative financial products for all types of situations. One of the best options is to connect with a mortgage broker who can shop your scenario amongst several lenders to see who is best suited to work with your situation. There are a couple of considerations; your refinance rate is likely to be higher than a regular loan and closing costs may be higher than average due to more perceived risk. If you have a decent amount of equity, a refinance might be a good option for you to consider to stop foreclosure.
Contact us and we can connect you with a qualified mortgage broker.
Before you stop reading, hear me out. I’m sure you’re thinking, “If I could make my mortgage payments, I would not be dealing with a foreclosure situation.” Granted, this may be true but step back and ask yourself if you have investigated every possible option to acquire the funds you need to repay the back loan payments.
Don’t let pride get in the way. Have you asked friends or family? Do you have unneeded or unwanted things that you can sell to generate some cash? Necessity breeds invention. Sit down, brainstorm with others and see what you can come up with. You may be surprised.
Banks are in the business of making money which means they prefer to collect monthly interest payments instead of taking properties back in foreclosure. Non-income producing assets are a drag on a bank’s balance sheet and constrains their ability to originate new loans.
Therefore, if you call the bank, explain the situation, many lenders are willing to offer a forbearance plan. Here is an example, let’s say you owe the bank $12,000 in back payments and fees, the bank might be willing to take that amount and divide that number over 12 months. They would add $1,000/month to your current payment until you satisfy the balance owed.
Keep in mind, for this to work, you must be able to make that extra payment each month or you will be right back in the same situation. If you end up in foreclosure again, the lender will be less likely to consider a future workout plan.
First thing first, I am NOT an attorney and this is not legal advice. Declaring bankruptcy is a viable option for some homeowners to stop foreclosure but I would consider it only as a last resort.
A bankruptcy will be reported on your credit report for up to 10 years and will also be reported in the local legal organ for your area. A legal organ is the local newspaper where you see court appearance notices, notifications of a will being probated, tax sales, bankruptcies, etc.
There is a cost associated with filing for bankruptcy. You will have to declare either Chapter 7 or 13; these refer to the different types of chapters defined in bankruptcy law. In some cases, you can renegotiate your debt, while in other cases you might able to walk away from your debts.
Bottom line, bankruptcy should be considered as a last resort. If you have exhausted all other options and feel this is the best route, I recommend reaching out to a few reputable bankruptcy attorneys for assistance.
The shared equity approach is the most difficult option but can be used in certain situations. This is how it works – you as the homeowner will borrow money from an investor to bring your loan current. In exchange for loaning money to you to take care of back payments and fees,, you will give the investor a portion of the equity in the property; this stops foreclosure and is better than giving the entire house back to the lender.
To be honest, this option is not used very often because there are not many investors who are willing to risk their money on a borrower who is currently behind on their mortgage payments.
The use of the title transfer method is one of our of favorite options when trying to help owners who are behind on payments. It is what we called buying the house “subject to” the existing mortgage. In simple terms, an investor offers to make up your back payments and take over ownership of the property, subject to the existing mortgage.
The existing mortgage stays in place but title of the property is transferred to the buyer (investor). The mortgage will stay in your name until the loan is paid off, which could be as little as sixty days , or as long as two to three years.
You may be thinking..”Why would I do this and How do I know the investor will make the payments?” The answer is quite simple. The investor has just invested significant capital to make up all back payments and now has skin in the game. No investor wants to lose their money and it only makes sense that he will do everything he can to protect his investment in the property.
While buying “subject to” may not sound familiar, it is a common way to buy properties that don’t have enough equity to support an all-cash purchase. It offers the following benefits.
We close all “subject to” transactions with an attorney and are happy to discuss your situation to determine if this strategy makes sense for your situation.
Many sellers just want to walk away from a difficult situation and sell their house fast for cash. Oftentimes, the property brings bad too many painful reminders and selling quickly and starting fresh is the way to go.
There is a famous Bible verse that says “weeping may endure for the night but joy comes in the morning.” Yes, things may be difficult now, but sometimes it is best to face what is happening, and start to take steps to set yourself for a better tomorrow.
The two most common methods to sell your house are to use a real estate agent or sell directly to an investor. Selling directly to an investor will save you the real estate agent commissions and investors often can pay all closing costs and even take care of removing furniture and handling repairs. Most importantly, selling to an investor saves you time without the hassles of endless showings which may not lead to a bona fide offer.
Selling via a real estate agent may take three to six months and then you have to hope the buyer can qualify financially to close on the property. If you are dealing with a foreclosure situation, that may be more time than you can afford. In Georgia, foreclosure happens quickly and banks often move forward with foreclosure, regardless of whether your buyer needs more time.
This is where we can help. We can pay cash and close within ten days. At Blue Arrow Capital, we have access to cash to offer homeowners who are looking for a solution to their foreclosure problem.
If you’d like to have a discussion about your situation, contact us 24/7 at 678-400-0883. Call us now. We look forward to hearing from you.
P.S. Remember, we have dealt with all types of seller situations, likely even more difficult than the one you are faced with right now. We are real estate problem solvers! You have nothing to lose – and quite possibly everything to gain by calling us right now at 678-400-0883, to discuss your options.
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