Preforeclosure is the beginning state of the foreclosure process. If you as the borrower fail to make your mortgage payment for 3 consecutive months you are considered to be in default. At this point, the bank or lender usually begins pre-foreclosure. If a homeowner fails to make the necessary payments, the bank will foreclose on the home, assuming ownership, and evict the homeowner.
Pre-Foreclosure Options
If you’re behind on mortgage payments, you’re likely to receive a “notice of default” from your mortgage lender. This document will state that you have not made mortgage payments for the last 90-180 days.
Refinance In The Mortgage
If your mortgage is “above water,” (meaning you have equity in your house) you may be able to refinance your mortgage, receiving lower monthly payments. This makes sense if you still have an income to pay your mortgage going forward, but if you have lost your job your lender will not issue you a new mortgage.
Short Sale
If you are underwater on the property, meaning the house is worth less than the amount you owe on it you can contact the bank and ask them to permit a short sale. In a short sale, you’ll sell your home for less than it’s worth, and the bank will take the loss as a tax write-off.
Bankruptcy
You can declare bankruptcy, which can buy you time to pay your debt. You shouldn’t approach declaring bankruptcy lightly as it will remain on your credit report for years and can cause significant damage.
A foreclosure can often negatively affect your credit score by 200-400 points and can prevent you from obtaining a loan of any sort for 5-7 years, so be very dutiful if you’ve received a Notice of Default from your lender.
If you’re in the pre-foreclosure stage… you’ve still got time to fix this situation.
Just connect with your bank to see if they’re willing to work with you… or contact us if you’d like to see what we can buy your house for or to tap into our free foreclosure foreclosure resources.