5 Affordable Home Foreclosure Alternatives

If you do not make your mortgage payments on time, this can readily cause a foreclosure sale. However, all is not lost if you are unable to make your mortgage payments. There are affordable alternatives that allow you to avoid the foreclosure process, or at least delay it. Even if your foreclosure sale is scheduled to happen in the next few days, you can stop the sale from happening. Here are a few affordable alternatives to foreclosure.


Short Sale

After your lender files for a foreclosure, but before the auction is settled, if you receive an offer from a buyer the lender has to consider it. If they do foreclose on your house, the lender is going to try to resell the house quickly. However, if you can offer them a reasonable offer on the short sale, the bank may consider it as saving them the effort and time of finding another buyer, especially if the market is soft. If your house does, in fact, go on the market, it is recommended that you try to locate a buyer; even once the foreclosure process has started. The most important thing is to figure out the best pitch to give to the bank so that they’d be willing to sell you back the home on short sale.



Up until the very day that you house is scheduled for auction, the majority of lenders would prefer to figure out a deal rather than foreclose the home. This means that you may be able to obtain a compromise that would work to your benefit and allow you to repay your mortgage rather than have your house foreclosed. In some instances, lenders may even be willing to reduce the debt that you owe.


File For Bankruptcy

Bankruptcy halts the foreclosure process from happening. Once a bankruptcy petition has been filed, federal law does not allow a debt collector, which includes a mortgage lender, from following through on any collection activity. Due to the fact that foreclosure activity is a collection activity, the very same day that a bank is aware that you’ve filed for bankruptcy, the foreclosure will quickly be frozen. However, the one catch is that once you go to court, the bankruptcy trustee will play the role of a referee between the creditors and you. So in essence, all bankruptcy does is give you more time to find a job or recover if you’ve been temporarily ill or physically challenged, it does not entirely let you avoid your debts.


Deed in Lieu

A deed in lieu is an alternative to a foreclosure, which is what it sounds like. It is when you are facing a foreclosure, and you sign the deed to your house to the bank voluntarily. Although it may seem like an excellent option, it has the same effect on your credit as a foreclosure. Lenders often are extremely reluctant to agree to take a house back by a deed instead of foreclosure because they worry that you will later sue them stating that you were unaware of what was going to happen. Additionally, lenders have to pay off any additional mortgages that you have on top of the first one. Lastly, the lenders want to know for sure that your financial distress is a reality.



Many loans these days are not assumable, as the majority of them contain a “due on sale” article that requires you to agree to pay the loan fully before you can transfer it. That being said, if your house is soon to be foreclosed, you may be able to get the bank to change your loan, and delete the clause that states the “due on sale”. You may also be able to talk your way to a down payment from the new buyer, which you can utilize to pay your outstanding mortgage balance. In this scenario, the buyer will become your tenant, and you will still own the property until the buyer has enough money to make a down payment.



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