[#] Options to Stop Foreclosure on Your Home

Trying to stop foreclosure can be overwhelming if you have already received a letter that says the entire balance of the loan is due. You may even start to believe that there is not really anything you can do at this point. While it might feel bleak, you do have options in front of you to stop foreclosure. Here are a few things that you can try to stop foreclosure and save your credit.

1. Loan Modification

Although the bank has led you to believe that you are destined for foreclosure, in most cases, they are still willing to work with you. If you call them and speak with a representative, there are a few things that you can do. They may be willing to modify your loan into a more favorable situation for you. If you are willing to negotiate with them, they may be willing to lower the interest rate, lower the payment, change the repayment terms and restructure old balances so that they are due at some other point in time. They might even waive the late fees and late payments as long as you are willing to re-commit to a payment schedule and make it work.

The banks want to keep you in your house just as much as you want to stay there. When they foreclose, they lose money. Therefore, they are willing to try many options to keep you in your house.

2. Hard Money

Getting a hard money loan is another way that you can stop foreclosure. Many people are not familiar with hard money loans as they are far different from traditional loans. With a hard money loan, you will pay a higher rate of interest, have unfavorable terms, and usually spend a lot of money overall. However, you do get to keep your house. This is usually a last-ditch effort and should be your last resort.

You are more likely to qualify for a hard money loan if your house is considered a good piece of property. If it is run down, old, and needs repair, you might not be able to secure a hard money loan. Hard money lenders base the loan on whether or not they think they could make their money back if they had to foreclose. They work with those in distressed situations every day. Therefore, they know that there is a high likelihood of foreclosure. Hard money loans are not ideal, but they do help you stay away from foreclosure. 

3. Ask for a Short Sale

Instead of allowing your home to foreclose, ask the bank if they would be willing to do a short sale on your home. This would allow the house to be sold for less than what the bank is owed on the loan. The bank may or may not be able to do this, but it will keep a foreclosure off of your record.

Can you access your 401(k) to avoid foreclosure?

If you want to avoid foreclosure, you could potentially access the funds in your 401(k) to do so. You can either take out a 401(k) loan or take a hardship withdrawal. If you have access to a 401(k) loan, this would be the better choice. With this option, you do not have to pay taxes on the money, and you do not have to worry about the 10 percent early distribution penalty if you repay the loan. If you do not repay it, you will have to pay taxes on the money that you withdraw as well as the 10 percent penalty. 

blog comments powered by Disqus