Help for Homeowners in Pre-foreclosure
Nobody wants to think about foreclosure, but it happens to people every day. If you’re ever worried about falling behind in your mortgage, it can help a lot to know the process. In Texas, it all starts with pre-foreclosure. We buy houses in pre-foreclosure frequently, so we can walk you through this process.
What Is Pre-foreclosure?
This is the step that happens before formal foreclosure takes place. Every state has different rules. In Texas, pre-foreclosure starts whenever you fall behind the mortgage payment schedule. The lender sends a formal notice of pre-foreclosure. It’s what lets you know that things are moving in a bad direction. You might be charged late fees. The lender will probably include a scheduled time when they will take the next step in the foreclosure process.
For Texans, pre-foreclosure lasts a minimum of 120 days. Several things can happen in this time, including different notices and legal proceedings, but the house cannot enter a foreclosure sale until after this period is up.
The most important thing to understand about pre-foreclosure is that it is not the end. You still have opportunities to resolve the situation. You can potentially keep your house. You can also potentially settle the debt without taking a loss. It all depends on the situation, and the methods listed below can help a lot.
Renegotiate the Loan
The first thing you should do in this situation is talk to the lender. In almost every case, they would rather figure out a way to catch you up on payments than have to go through foreclosure. There are a ton of options that can help you do this. Some common negotiations include forbearance and loan modifications.
Forbearance is the simplest option. Basically, you keep the same mortgage, and you add a second set of monthly payments designed to cover what you missed up until that point. It’s not always viable, but if you were late on your mortgage because of a temporary issue, forbearance can resolve the issue and prevent you from paying extra interest.
Loan modification is where you take negotiations to the next level. This is where the foundation of the loan agreement is adjusted. Usually, the lender will lower the monthly payment that you owe and extend the duration of the loan to compensate. The interest rate might also be adjusted to help make the numbers work.
Sell the House
For many people, selling their house is the best way to stop foreclosure. When you sell a house that is in pre-foreclosure, there are a few things to understand. First, you need to receive payment for the sale of the home before pre-foreclosure ends (although you can negotiate this point with your lender). This is necessary because you have to pay off the loan by that time or else you can’t sell the house. Considering the time frame, you need to sell your house fast to beat foreclosure.
The second thing is that selling the house doesn’t automatically end the mortgage. You have to pay everything owed, including late fees. More often than not, the house will sell for enough to cover everything and even leave some money left for you to keep. But some houses don’t sell for enough. When that’s the case, the mortgage is considered upside down. The house isn’t worth as much as the cost of the mortgage.
If you are in that situation, there is still hope. You can try the next method.
Try a Short Sale
A short sale involves a special circumstance, and you can’t pursue it unless the lender agrees. With a short sale, you sell the house and all of the proceeds go to the lender. You’re expecting that the house won’t sell for enough to cover the mortgage. Generally, a lender agrees to forgive any remaining balance, and you walk away free and clear. You don’t have money left in your pocket from the sale, but you also no longer have an upside-down mortgage.
It’s not ideal for either party, but it can sometimes be the best way to get out of debt. Many lenders agree to short sales because they are much easier than foreclosure auctions. Also, they don’t ever know how much they will actually get at auction. It very well could be less than the short sale, and they know that. So many lenders take the known short sale value to minimize their losses. The challenge of this process is that it can be difficult to sell your house fast enough to beat foreclosure.
Pre-foreclosure can be scary and stressful, but help is available. You can contact We Buy Austin Houses. We’ll look at your property and get you a cash offer so you can sell your house fast. We buy houses for cash, offering you the best pre-foreclosure relief possible.