Homeowners who get behind on their mortgage payments more than 4 months can have their mortgage lender start foreclosure proceedings against their homes. A foreclosure is when the mortgage lender starts legal proceedings to take over a homeowner’s home due to the homeowner defaulting on the terms of their mortgage note. Most foreclosure proceedings is due to the homeowner not making their mortgage payments. Selling your home prior to foreclosure is possible if you have equity in your home. Many homeowners do have equity in their homes but due to a loss of job or other extenuating circumstances cannot make their monthly mortgage payments. If you have equity in your home, selling your home prior to foreclosure is recommended where you can avoid actual foreclosure and recoup some equity from the sale of your home.
Contact Your Lender If You Are Selling Your Home Prior To Foreclosure
If you can no longer afford your home due to a loss of your job or loss of your business and you cannot afford your mortgage payments, contact your mortgage lender prior to getting behind on your mortgage payments. Mortgage lenders are more likely to work with you if you contact them prior to you being late on your mortgage payments than if you avoid them and contact them when you are behind. Mortgage lenders have a workout department for homeowners who cannot afford their mortgage payments. The workout department does not want your home. The last thing the mortgage lender wants is to accumulate real estate inventory. The real estate they have liens are is just a security instrument where they can protect the mortgage loan they have and not to take the home away from you and sell it for a profit. If you intend on keeping your home and you cannot afford to keep up with your mortgage payments temporarily until you find a new job, then the workout department of your mortgage lender may offer you a forbearance. A forbearance is when a mortgage lender will give temporary relief to the homeowner and give the homeowner some time from making the mortgage payments until the homeowner gets a new job or able to afford to make timely payments again. After the forbearance period is over, the amount that was due can be rolled back to the balance of the mortgage loan or can be spread out for a period of time. Sometimes, a mortgage lender may just forgive the past due mortgage payments.
Short Sale: Alternative To Foreclosure
For homeowners who have no equity in their homes and the homeowner will not be able to afford their mortgage payments in the near future, the mortgage lender may offer them to do a short sale. A short sale is when the mortgage lender will approve the homeowner to sell their home below the amount they owe on their mortgage loan. Short sales are normally executed when the mortgage loan is upside down and the mortgage loan balance is higher than the value of the home. Another alternative for homeowners who have homes with mortgages underwater is to do a deed in lieu of foreclosure . A deed in lieu of foreclosure is when the mortgage lender will accept the deed to the homeowners home in lieu of foreclosure and going after the homeowner for the deficit of the foreclosure.
For homeowners with equity in their homes, selling your home prior to foreclosure is the best option where they can sell their home in a timely manner and get their equity back from the sale of the home. You can discuss with your mortgage lender that you are selling your home prior to foreclosure and see if you can delay the foreclosure process.
Qualifying For New Mortgage After Selling Your Home Prior To Foreclosure
Many homeowners end up selling their home prior to foreclosure and avoid a foreclosure on their credit report. If you are selling your home prior to foreclosure and are successful in selling your home, chances are that you want to purchase another home. Qualifying for a new mortgage after selling your home prior to foreclosure can be challenging. A home buyer can qualify for a FHA insured mortgage loan with only a 3.5% down payment and a credit score of 580 FICO and prior bad credit. You can have unpaid collection accounts and still qualify for a home loan. You can have a prior bankruptcy and qualify for a home purchase loan after a two year waiting period. You can qualify for a home loan with a prior foreclosure, deed in lieu of foreclosure, or short sale after a three year waiting period. However, mortgage lenders want to see a timely payment history from the mortgage loan borrower for the previous 12 months. One or two late payments is fine on a non-mortgage related creditor. However, almost all mortgage lenders want to see 12 months payment history on the mortgage payments. A one time 30 day late payment on a mortgage payment may be acceptable. If you are selling your home prior to foreclosure, please keep in mind that you may have to wait 12 months prior to being able to purchase a new home if your mortgage lender has reported you late on your mortgage payments.
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