In other sections of this website, we've outlined the steps involved in Washington foreclosures and how to arrange a short sale. Below are some things you can do to buy yourself some time in order to stop a foreclosure. But keep in mind that the only thing that will truly stop foreclosure proceedings is repayment of the debt. Everything else is delay of the proceedings.
If you are behind in your mortgage payments and are having trouble making your next monthly payment, you need to act now. What you do can prevent you from losing your home through foreclosure. If you are in serious financial trouble, you need to seek professional help to best protect yourself.
1. Communicate with your lender
The first thing you need to do is to communicate with your lender about your difficulty making your payments. You may assume they already know this if you have missed payments, but you must contact them anyway. You may be surprised that your lender really does not want your house. They are in the business of lending money, not in the real estate business. They may be very willing to work with you to find a way for you to keep your home. But the longer you wait to contact them, the harder this will become. Eventually, if you become several months behind in your payments and you have not contacted them, your lender will assume you have no intention of repaying your loan. Contact them early and keep in contact with them as your financial situation changes.
Your lender will most likely, ask you many questions about your situations. Be prepared by reviewing and answering these questions [link] ahead of time. Your preparation and candidness may impress your lender that you are sincere in trying to repay your loan.
There are options to foreclosure that may work for you. If you have equity in your home, you may be able to modify you existing loan or refinance it. Basic lending guidelines will require all home loans to total up to less than 70% of the current market value of the property. If you have more equity than that, you should have no difficulty in obtaining a new refinance or 2nd Trust Deed to bring your loan current. Expect higher interest rates and loan fees.
2. Loans To Get You Current
If your financial setback is temporary and the causes of your situation has changed for the better and you are going to be able to keep the property, first consider family and friends for a loan to get current. It's much cheaper than hard money loans, but MAKE SURE you will be able to pay them back. You do not want to put them in the position of having to foreclose to get their money back. There are hard money lenders who typically are private investors who will lend money based on equity in the property. Credit and income are not issues of importance and loan approval is usually a matter of days with funding following shortly. Loan amounts will usually be enough to bring existing loans current, pay the financing costs and put some money in your pocket. Loans will be amortized over 30 years to keep the payments lower and the balance will be due in 2 to 5 years.
3. Selling your home
Or it may be time to consider selling your home. Regardless of whether or not you have equity in the home or if you think you owe more than it’s worth, you should talk to an agent and get a professional opinion as to what your home might sell for and how long it might take. If you find yourself in this position, give us a call. We would like to help give you the tools and information to make an informed decision on what to do next.
How do you know if you should sell your property? If your monthly house payment (including property taxes and insurance) does not exceed 40% of your gross monthly income, it should be possible for you to keep the property. If the payment is greater than 40% of gross monthly income, consider selling or transferring the property to avoid negative impacts to your credit. The objectives in order of importance should be:
- Keeping the property if possible.
- Don't give away equity if you can keep it or liquidate and put it in your pocket.
- Minimize damage to your credit. You will need it later on.
Bankruptcy is a major step that will have lasting impact on credit reports. You may want legal advice if you are considering this option. If the Notice of Default has just been filed on your home, you still have sufficient time to explore the options for new loans or selling the property. If the public auction is going to be held very shortly, Chapter 13 bankruptcy is a very common way to delay the sale. When you file bankruptcy, your financial matters fall under the jurisdiction of the courts which could limit your options.
I am not an attorney and I do not practice law or give legal advice. Please call an attorney if you're facing foreclosure and in need of legal advice. The information on this page is only designed to provide you with definitions of certain terms and concepts.