Absolutely the first step to avoid foreclosure is to contact the lender and let them know your situation. In many cases, they can work with you to temporarily modify payment terms until your situation is resolved.
Never, ever ignore late notices, letters or calls from your lender. They would much prefer to work together with you to resolve the situation, but will not hesitate to begin foreclosure proceedings if it appears that you are unwilling to work with them to avoid foreclosure.
If you're still current on your payments, or not too far behind, refinancing may be a viable option for you. Refinancing will pay off your current mortgage and in many cases lower your monthly payment at the same time. It can be the most straightforward method to avoid foreclosure.
This may be the toughest route to stopping foreclosure, particularly if you still need somewhere to live, but it may be the only way to stay out of trouble and prevent a black mark from appearing on your credit record. If you need to sell fast, there are home buyers in your area who will allow you to do that. They can close in 10 days or less, or on whatever timetable fits your schedule, and allow you to walk away with cash at closing.
Be very, very careful, though. There is no shortage of people who will use this opportunity to make a profit for themselves at your expense. To keep yourself from falling victim to these predators, be sure to read "We Buy Houses" Scams — How to Spot Them and How to Avoid Them.
Ultimately, protecting your credit must be your number one goal. Your credit report will be with you for the rest of your life, and having a foreclosure noted on it will cause problems for many, many years down the road — problems that only time will erase. Take steps now to keep that from happening. It may be difficult in the short-term, but the long-term results far outweigh the alternative.
One of the most common types of "we buy houses" scams allows the "buyer" of the home to make off with most or all of your equity. It begins with you transferring your home's deed to the "buyer." The buyer may then have you make payments to him instead of the mortgage company, or he may have you move out so he can begin renting out the house.
There are several ways the buyer can then profit from this transaction. First, he receives some sort of payment every month — whether from you or from the renter. Second, he can use the equity in your home to secure home equity loans or other lines of financing. Third, he can simply resell the house without satisfying the outstanding mortgage.
Ultimately, once most of his profit is exhausted, he simply stops making payments on the mortgage and allows the home to go into foreclosure, because while he holds the deed to the home, he never assumed liability for the mortgage. As a result, you are left with a foreclosed home, no remaining equity and a significant black spot on your credit history.
If you need to sell a house fast, here are a few rules for protecting yourself from falling prey to a scam like these.
The best way to protect yourself from scams is to work only with professionals who have an established history of home buying. These days, anyone can order a book from an infomercial and become a "professional home buyer," but real professionals have been in business for many years and have closed millions of dollars in real estate transactions. Their primary concern is the health of their business, and they will not risk that by cheating you or otherwise treating you unfairly.
If you have any concerns about the buyer, don't hesitate to check them out. Contact your state Attorney General's office, your state's Real Estate Commission, or your District Attorney's Consumer Fraud Unit. If they are an established business, also check out the Better Business Bureau.
Not asking questions because you are afraid of looking stupid could end up costing you tens of thousands of dollars or more if you end up in a deal that wasn't what you thought it was. A lawyer or even your mortgage company can help you if you want professional advice from a third party. Never, ever sign a contract that you don't understand.
If a disagreement arises about a verbal agreement, the issue becomes your word against theirs and often must go to a court of law to be settled. Don't risk that. Insist that all terms be in writing, and don't agree to anything that isn't.
If you have any doubts about the buyer or the contract — or if it just doesn't feel right — just walk away. It's never worth the months (and maybe years) of future headaches to sell your house a few days sooner.
If something sounds too good to be true, it usually is. So don't get so emotionally tied up in the sale of your home that you abandon caution and logic. Your home is both a major financial obligation and a major asset. Falling prey to a scam like these will have major repercussions many, many years down the road — and maybe for the rest of your life.
In most states, when you buy a home there are actually two parties on the buying side: you (the mortgagor) and the lender (the mortgagee). You own the home, but the mortgagee holds a lien on the property for as long as the mortgage has an outstanding balance. The lien gives the lender the right to assume ownership of the property should you fall behind on payments. That process by which the lender assumes ownership is called foreclosure.
All other states use a deed of trust, which serves the same purpose as a mortgage but actually involves three parties: you (the trustor), the lender (the beneficiary), and a third party (the trustee) who holds the temporary title on the home until the full balance is paid. In these states, the foreclosure process involves the trustee selling your home when you become delinquent.
A key difference between mortgages and deeds of trust is in the foreclosure process. With a mortgage, the lender must go through the court system to foreclose on your home. Not so with a deed of trust. The trustee must first fulfill certain requirements, but is then free to sell your home without going through the court system, leading to a much faster foreclosure.
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