A house is not only an investment. For most people, a house is also a home. Even in times when you experience financial distress, you should not have to lose your home. Unfortunately, the loss of a job, an illness that prevents you from working, excessive medical bills, or an overwhelming amount of debt can all lead to financial distress that may increase the risk of you losing your house. Thankfully, help is available if you are facing foreclosure. Here are a few solutions to gain back control of your finances while stopping the foreclosure process.
Refinance Your Mortgage
One possible way to save your home if you are facing financial hardship is refinancing your mortgage. Of course, refinancing will only be an option if you have not experienced any negative changes in your credit report.
Contact a lender that offers no-closing-cost refinancing programs to ensure you do not have to pay anything out of pocket to refinance. Then, you can refinance your current loan to get a lower interest rate and lower your monthly mortgage payments. These lower payments may be more suitable to your current financial situation, helping you avoid foreclosure.
The type of refinancing you can qualify for will depend on a few factors, including your current credit score. Most lenders will approve a refinance if your credit score is 620 or higher. However, if you are hoping to refinance a non-FHA loan to a FHA mortgage, you may qualify with a minimum credit score of 580.
Remember that the higher your credit score, the better chance you will have at being approved for a lower interest rate, which equals a lower monthly payment.
Consult A Lender
If you are in the midst of financial hardship, consider contacting your lender to make arrangements before foreclosure proceedings begin. Most lenders will work with you because they do not want to spend the money or time hiring legal professionals to begin the foreclosure process.
Most mortgage companies have a designated team that works with customers who are facing foreclosure. Your lender may allow you to make lower payments for a period of time or add missed payments to the end of your loan.
There will be a process the lender will want to go through to determine whether you qualify for these hardship programs. For instance, you may be required to show bank statements, proof of an injury or medical illness, and even proof that you are no longer able to work.
While it can be overwhelming and not an option offered by all lenders, consulting your mortgage company for help may be a smart solution for saving your home if you are facing foreclosure.
For homeowners who are past the point of refinancing and cannot work with their lender to avoid foreclosure, filing bankruptcy is the best solution.
Filing chapter 7 or chapter 13 will both stop the foreclosure process. Once filed, an automatic stay is set, which prevents creditors from collecting debts. Your lender cannot contact you in an attempt to collect on mortgage payments, and the foreclosure process will stop until the courts give permission to proceed on the next step.
If you file chapter 7, the bankruptcy will wipe out your other debts and allow you to stay in your home ONLY if you are current on your mortgage payments. If foreclosure proceedings have already begun, filing chapter 7 can delay the sale of your home, giving you more time to figure out your next move.
Chapter 13 bankruptcy is more of a repayment type of plan, meaning you will pay a certain amount of money to a trust, which is used to pay down your debts. This repayment plan will include the "arrearage" or unpaid late payments from the mortgage. This gives you a way of catching up on your debts and mortgage while staying in your home.
For more information on filing for bankruptcy, contact a law firm like Phoenix Law.