The 3 Types of Foreclosure Loans

Foreclosure loans can be used by consumers to try to avoid foreclosure. This type of loan is risky for the new lender because it is dealing with someone who is in the middle of a foreclosure. Here are some of the different types of foreclosure loans that you could pursue.

1. Traditional Refinance

One of your options is to get a traditional refinance loan from a bank or mortgage lender. Certain banks will market this type of loan to consumers. When you get this type of loan, you will take the money from the new lender and use it to pay off your old lender. This will give you a completely new loan on which you can begin making payments. This will help you avoid foreclosure completely, and it will potentially give you more favorable terms to work with. Not every lender offers this type of refinance loan. In order to find lenders that offer foreclosure refinance loans, you will most likely need to call around to the different lenders in your area and shop online.

2. Private Money Refinance

Another option that you could pursue is a private money refinance. With this type of loan, you will be borrowing money from a private lender to pay off your existing loan. Private lenders can be businesses or individuals that have excess money to lend. They do not go by the same lending criteria as do traditional banks. This gives them more flexibility when it comes to offering loans to certain people. Many times, they will be willing to work with individuals in foreclosure situations as a way to attract more business. 

3. Hard Money Refinance

You can also try a hard money refinance. With this type of loan, you will need to work with a hard money lender. Hard money lenders are businesses or individuals that are willing to loan money for many different purposes. With this type of loan, you will have to pay extremely high interest rates compared to what you can get from a traditional loan. Big benefits of this type of loan are that you can get it done quickly and the criteria for approval are flexible. Many hard money lenders are willing to work with individuals in distressed situations such as a foreclosure.

You could borrow just enough to pay the money that is in arrears with your lender, or you could refinance the entire loan. When you use a hard money loan, it should only be to buy time until you can get a more traditional loan. Hard money loans are generally very short term and will require you to refinance them at some point in the future. For example, you might expect your hard money loans to last only somewhere between one and three years at the most. This can provide you with time to rebuild your credit and to shop around for a regular lender. 

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