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Steps to prevent home foreclosure

Facing foreclosure can be a challenging and stressful situation.

To understand how you can avoid foreclosure, you must first understand these concepts:

• Mortgage

• Foreclosure

What is a mortgage?

A mortgage represents the debt you owe a bank that loaned you the money to buy a home. When you take a mortgage, your home becomes the collateral to it so that if you can’t pay for your mortgage, the bank or lender can take the house from you.

What’s the foreclosure process?

When you take a mortgage, the bank gets partial ownership of the home for the amount they loaned to you.

If you stop paying your mortgage, the bank has the right to take the home away from you, which is what foreclosure is.

How can you avoid foreclosure?

When you’ve defaulted on your mortgage, the bank will give you a notice of default in which your entire mortgage is due immediately.

If you can’t make payments for whatever reason, the best action is NOT to ignore your bills.

Here are some of the options to avoid foreclosure:

• Reinstatement

Give the bank a call, and they can allow you to catch up on your payments and have your payment schedule continue as before

• Request a forbearance

A forbearance will delay foreclosure when you’re experiencing temporary financial difficulties. It may only apply if you’ve been paying your mortgage regularly.

• Short refinancing

If you still have your source of income, you can request to refinance your loan. If the current interest rates are lower than when you first took the loan, your payments may be lower.

• Apply for a mortgage modification.

The bank may give you options to refinance your mortgage and allow you to get back on track with your payments.

• Reverse mortgage

If you’re at least 62 years old and have significant home equity, you may be allowed to take equity from the home to pay off your original mortgage.

• Consult a HUD-approved counseling agency.

Essentially government assistance, the ​​U.S. Department of Housing and Urban Development has programs to help homeowners facing foreclosure.

What to do if foreclosure is inevitable?

If foreclosure is inevitable, you don’t have to let it all go. Here are your options:

• File for bankruptcy

You must file bankruptcy before the court, and then collecting all debts, including your mortgage, will stop temporarily. You’ll have to make a plan to repay your lenders and creditors and have it approved by the court. 

• Conduct a short or pre-foreclosure sale.

You can make a short sale if you’re deep into a financial hardship like bankruptcy.

A short sale is when you sell your home before it’s due to be foreclosed.

Usually, you’ll only be able to sell it for less than the amount of your mortgage. However, you can negotiate the deficiency or the difference between your mortgage and the sale amount for the bank to be able to forgive your entire mortgage balance.

I talked about it in the video above.

• Sign a deed in lieu of foreclosure.

A deed in lieu of foreclosure is when you surrender the house to the lender instead of proceeding with the foreclosure so your mortgage may be forgiven.

If you want to know and need assistance avoiding foreclosure with a short sale, specifically in the DMV, I’ve been a licensed real estate agent and broker for over a decade. I’ve helped hundreds of buyers find the best home, and I can help you find yours. You can reach me at (703) 346-2776 or Dan@greetingsvirginia.com.