How To Stop Foreclosure, Save Your Credit (and your future)
This nightmare scenario is timeless.
A perfect storm of unfortunate events compounds and you can’t make your payment. It might happen to them but it could never happen to me. Well, now you’re them. And I’m me(?). I think.
The good news is, there are a ton of ways to stop a foreclosure in its tracks and avoid the huge negative scarlet letter on your credit report. Love it or hate it, credit is the lifeblood of our bitter-sweet society and, coming from someone whose family lost their house to foreclosure, when you don’t have any, it makes everything you do so much more difficult.
If you are staring down the barrel of lis pendens and don’t have a clue where to turn, it’s scary. Not only that, it’s demeaning. The last thing you want to do is reach out to family and hear the wonderful “I told you so’s” about every decision you’ve made that they swear led you to this point. Why tell your friends and coworkers, so you can feel their judgment every time you grab lunch? Regardless of what got you here, we can get you out.
Before we talk about your solutions, let’s revisit the 5 stages of grief and loss. Just about everyone goes through all 5 of these albeit in different ways and for different lengths of time.
1 — Denial — Putting your head in the sand while in pre-foreclosure does not make it go away. The first time you see the notice you may have shrugged it off as a mistake or decided that there is no way anyone is going to take your house.
2 — Anger — anger is a necessary part of the grieving process. Anger keeps you hungry and you can use that anger to do something about the situation you’re in. Try hard not to let anger at yourself turn into resentment.
3 — Bargaining — “please, bank! If you stop the foreclosure process now I will do everything I can to make up the payments and never ever miss one again”. Bargaining might feel like you’re only option, but there is a much better way.
4 — Depression — Once bargaining fails to correct the situation, hopelessness takes over. You feel like there is nothing you can do to stop foreclosure. We do not agree with that conclusion.
5 — Acceptance — the reality becomes real. This doesn’t mean you’ve lost hope (see above) but that you accept where you are and what got you here. You can’t change the past, but now you can shape your future if you can figure a way to stop this foreclosure from going through.
8 Strategies to Stop Foreclosure Before it’s Too Late
You’ve accepted the reality of the situation and are ready to take action. My company invests in real estate but we are problem solvers first and foremost. I come from an engineering background and have 11 years of experience of troubleshooting aircraft systems and my wife and business partner has a degree in business analytics.
We. Solve. Problems.
Loan Modification
A loan modification does not pay off your existing mortgage but rather modifies the terms of that loan. The payments you’ve missed will be tacked on to the end of the loan term (with interest) and it can be difficult to qualify. Borrowers must be current on all taxes, have no outstanding liens other than the mortgage, and not have had a loan modification requested more than twice in the past 12 months.
Bankruptcy
Bankruptcy does not completely stop the foreclosure but it will delay the process. While the details of the bankruptcy are ironed out, you and your house will accrue substantial legal fees and interest on any unpaid monies.
It can be expensive, but it is an option to avoid losing your home to foreclosure.
Refinancing your Current Mortgage
Refinancing can be a great option under normal circumstances. Oftentimes homeowners can reduce their interest rate and extend the term of the loan which drastically lowers their monthly payment.
Qualifying for a refinance is nearly as difficult as obtaining a purchase mortgage. This means that your credit must still be excellent and the house has to be in good condition. If you’ve missed enough payments already, the bank may be hesitant to extend further debt to you given the circumstances.
Personal Loan or another type of loan
A personal loan can be a great option to stop foreclosure if your current situation has a defined end date. An example of this may be that you are changing careers and have been unable to make payments BUT you are nearing the end of your new education and/or training. You will be qualified for a higher-paying job soon and just need to make it a few more months. These loans have high-interest rates and short terms so their monthly payments may not be much better than the mortgage payments themselves.
Other types of loans exist such as bridge loans and hard money loans. Hard money loans are asset-based so they depend less on your income and credit. The downside is that they are very high interest and they may come with a deed in lieu waiver. If you miss a payment, they seize the asset which collateralized the loan. Basically, they take the house.
Short Sale
A short sale can get you out of the foreclosure process but you as the homeowner get no money in your pocket whatsoever. The bank approves the sale of the property at or below what is owed to them. They take a loss, so they don’t expect you to profit from the situation either.
This happens when you owe about what the house may be worth on the market.
Selling with a Real Estate Agent
If you owe less than what the house is worth, you may be able to sell your house with an agent. They will be able to get you a higher price than a bank will during a short sale.
The downside is that you may not have time. Selling through a real estate agent follows a very structured path that takes 6–8 weeks, on average, to complete. You may not have that much time to stop the foreclosure.
Sell Home for Cash
Selling for cash fast may be the easiest most stress-free option on this list. You negotiate with a home buyer (like myself) who plans to buy your house, fix it up and sell it later or rent it out. These transactions carry a lot of risk for the buyer such as material and/or labor shortages, supply chain issues, market conditions, and unknown factors inside of the house itself.
Because of the risk on the buyer and the convenience given to you, the seller, this offer price is low enough to allow for a profit to be made. This means it may not be high enough to pay off the loan to the bank. You will stop the foreclosure, but you will need to come out of pocket to make up the rest using your own money or a personal loan.
Sell Home on Terms (a.k.a. creative selling)
Last but most certainly not least is selling your home on terms. This is our bread and butter and we believe this is the only true way to reach a WIN-WIN scenario for you, the homeowner, and myself, the buyer.
Selling on terms means that you sell the house according to a set of terms. That’s all. The best part? These terms are completely negotiable because they are made up, on the spot, based on your unique situation.
For example, if you owe too much but desperately need to stop the foreclosure AND you have a vacation planned to watch your daughter get married in Hawaii in a couple of months, we can make that happen. Just because you ended up in a rough situation doesn’t mean that you need to spend your life paying for it. We can make sure that you walk away with the money you need and save your credit.
By saving your credit today, you save your future tomorrow and avoid spending the rest of your life picking up the pieces if you’re not able to stop foreclosure before it’s too late.
My company name is Trekside Property Group, LLC and we are located in Pittsburgh, PA but we operate nationwide through a network of investors who are all fluent in the skills and resources needed to help you stop a foreclosure from ever happening!
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