There are many ways to stop foreclosure, if you know what you’re doing. For these methods, we’ll assume that you already know how to perform them, or that you’ll be getting help from a professional to help use these methods to stop foreclosure.
Foreclosure Loan Workout Plan
With a loan workout plan, you’ll be making a lump sum payment up front to your lender. You will also have to make your normal mortgage payment, along with enough extra to pay off your total arrears in 18 months or less. Here is an example of a foreclosure workout plan:
Total Arrears = $9,500
Normal Mortgage Payment = $1,200
Workout Plan Down Payment = $2,400 (two payments)
Workout Plan Monthly Payment = $1,595 (remaining arrears / 18 + old payment)
For foreclosure loan workout plans, your lender may require up to half of the arrears down, and you will need enough income to cover the new monthly payment. The sooner you begin a workout plan the better. Your lender will require less down and will be more likely to approve a workout plan, if you act quickly.
Foreclosure Loan Modification
With a loan or mortgage modification, it’s almost like your getting a brand new loan. Your existing lender will re-write the terms of your loan to make it more affordable. This can be accomplished by lowering the interest rate and/or extending the term of your loan. Many times, you will need to enter a Foreclosure Loan Workout Plan before a Foreclosure Loan Modification can take effect. Your credit is usually not a determining factor in a loan modification, but you will need to prove that you have enough income to make the new payments. Many times, there are fees associated with a mortgage modification and the terms may be negotiated, so make sure you know what you are doing, or seek the help of a professional to make sure you get the best deal on your new Mortgage Modification.
- Foreclosure Loan Rewrite In many cases, lenders or mortgage brokers may have broken the rules when you originally got your loan. If your loan was provided using falsified documents, inflated appraisals, or if you didn’t understand the terms of your loan, you may qualify for a loan rewrite. When your loan is rewritten, its like getting a fresh start, from day one. All the arrears are forgiven and you start over with a brand new payment, which is usually a lower fixed interest rate. For this to happen, you will always need help from a professional. The average person could not perform this service on their own. It is also required that you seek this type of help before you get too far behind. Once a sale date is scheduled, it’s too late for a foreclosure loan rewrite.
- Foreclosure Refinance A foreclosure refinance is surprisingly easy to accomplish under the right circumstances. There are three basic requirements for a foreclosure refinance, and credit scores are not one of them. The first is equity; in most cases, you will need at least 35% equity in the home. This varies, depending on the value of the property, but if you have around 35% equity, then a foreclosure refinance is worth checking out. The second is income; you will need enough income to afford the monthly payments. The third is location; your home must be in a location where a foreclosure lender will provide loan. This may exclude small rural towns or cities where property values are rapidly declining.
- Foreclosure BankruptcyOur final option is bankruptcy. Although many people think bankruptcy will cause them to lose their home, it can still be considered as an option to stop foreclosure. We generally recommend this option as a last resort, but if none of the other options will work for your situation, a Chapter 13 bankruptcy can allow you to keep your home and avoid foreclosure. Bankruptcy is something that can be done on your own, but we highly recommend working with someone who specializes in foreclosure, so you fully understand the impact bankruptcy will have on your life.
Remember, not every stop foreclosure method will work, depending on your exact situation. If you are unsure of how to proceed, or if you are unaware of the negative effects caused by any of the methods described above, please seek professional help immediately.