3 Ways to Avoid Foreclosure

If you are trying to avoid foreclosure you should know that you are not alone. Millions of people face foreclosure every single year and it is nothing to be ashamed of. While many people give up, it is not the only option. In fact, there are several ways that you can avoid foreclosure if you are willing to do some work. Here are some of the best ways to keep your house and your good credit. 

1. Loan Modification

Many people do not understand that their lender may still be willing to work with them after they receive a default notice. When you get a default notice, it usually says something about the entire balance being due. This makes you think that unless you have the entire balance, they are going to take the house back. However, there are other options. 

As soon as you get the notice in the mail, give the lender a call and talk to them about it. In most cases, they will want to work with you. When you lose your house, they also lose a monthly payment coming in from you. This hurts their bottom line and if enough people lose their homes, it can affect them drastically. They may be willing to alter your existing loan into more favorable terms for you. They can lower your interest rate and get you a payment that is more reasonable. In this way, you can keep the house and your existing loan with the bank. 

2. Hard Money Loans

Another often overlooked option is to use hard money loans. Hard money loans are made by private investors that want a higher return on their investment than normal. These individuals make it a common practice to work with distressed individuals. Since they are charging an unusually high rate of interest for their money, they know that they will have to work with those that are desperate. 

Another good thing about hard money loans is that they are not necessarily based on your credit score or your income. The most important criterion in a hard money loan is the value of the property itself. Hard money lenders know that there is an unusually high rate of default on these types of loans. Therefore, they understand that they better be able to get their money back out of the house. They will never offer a loan amount for the full amount of the house. They will usually only allow you to borrow 70 to 80 percent of the value of the home. This ensures that they can get their money back after transaction costs, and if the real estate market goes down. 

3. Sell the Property

This option could be the least attractive because it results in you leaving the property. However, this is still better than allowing a foreclosure to go through. Having a foreclosure on your record does not go away for seven years. It may be difficult to get another mortgage again as a result. Selling the property gets you out of the mess you are in and gets you a clean slate.

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