How to keep your house out of foreclosure even if you can’t make the payments
August 19, 2020
How can I recover...
Let’s be real, 2020 has been a year from Hell for some. No one expected a global pandemic, rioting, and protests, amidst a contentious election year. The soaring US economy took a nose dive leaving millions out of work. Those left picking up the pieces are somewhere between denial and panic.
What if you are one of those people who lost their job and are struggling to make your mortgage payments? How do you keep your home from going into foreclosure? You worked hard to have the credit scores you have and now you’re facing giving your house back to the bank.
There are solutions with your lender
Talking to your lender about your options is step 1 but as you do make sure you know the difference between forbearance and deferment. Lenders offer options because they are not in the business of owning real estate. They don’t want to take your house back!
Forbearance means you can pause your mortgage for a period of time, usually a few months but there are some things to know about this. Let’s say you talk to your lender about putting your mortgage payments of $1,500 per month into forbearance for 3 months. That means you will owe the entirety of the amount on the 4th month totaling $6,000. ($4,500 for the 3 missed payments and $1,500 for the 4th that is due.) Forbearance also has a very negative effect on your credit as it is viewed as non-payment and reported to the credit agencies as such.
Deferment is a much better option if you can qualify for it. When your mortgage is deferred it means the missed payments are added to the end of your loan and thus extending the lifetime of the loan. It’s like freezing your payments for a period of time and picking back up when you can but just paying longer. This does not usually have a negative effect on your credit score making it the best way to go!
What if forbearance or a deferment isn't an option?
I was chatting with a lady who was in this situation awhile back who was, as we’d say in Montana, ‘worked up into a lather.’ And…I didn’t blame her one bit. She had lost her job and was somewhere between anger and denial. She had some money saved but she couldn’t pay her mortgage payments. She knew she couldn’t fulfill the requirements of forbearance and she didn’t qualify for a deferment.
When I asked what she had planned to do she said she was going to move out and give her house back to the bank because she was out of options. But was she? Actually, no!
What you don't know really can hurt you-for a long time!
As I explained how a real estate investor can come in and assume her loan, make all of her missed payments (repairing her credit), renovate her home and then sell it paying off her entire mortgage she began to look human again. The stress began to melt as she saw a way out. She had no idea and the amount of stress she was under made her spin in circles. She asked me to explain the process again and again which I didn’t mind one bit.
I did some digging and found some investors in her area for her to talk to about her options. I didn’t know her market (now that I don’t live in Montana anymore) and one thing I won’t do is buy in a place I don’t understand but that doesn’t mean I can’t help her! To my knowledge she was able to work things out with an investor in her area, she found another job, and a great place to rent with her credit intact until she feels confident enough to buy again.
If you are in a similar situation, reach out to some investors in your area. Pull up your Facebook and type in ‘real estate investor’ or call the numbers on those signs you see that say, “we pay cash for houses.” This is one tip you really need to hear, though…get a real estate attorney involved. Depending on the state you live in they are the ones handling closings anyway, but do some research to see who handles things like this in your state and make some calls. Make sure you are protected if the investor doesn’t pay your mortgage payments. Don’t just trust someone to do the right thing! Make sure they are bound by a contract to do just that! And besides, good contracts keep (or make) good friends!
If you have more questions about this process, shoot me a message on Facebook or send me an email at [email protected]. I’d be happy to try to help!
-Teresa
AEG Homes, LLC