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A foreclosure is not good for your credit rating so you should do anything possible to avoid this unfavorable situation. Below are some excellent foreclosure alternatives for you to consider.
Loan modification
If you can make payments on your mortgage but you do not have enough to bring the account up to date, you can apply for loan modification. In this case, the lender can change (modify) the terms of the loan so that you have a way to repay the loan. This can be done by lowering interest rate or by adjusting the number of years you have to repay the loan.
Payment plan
This is also called “forbearance” and it is one of the most convenient foreclosure alternatives. A forbearance agreement with the lender gives you time. Once you sign this agreement, you pay only a part of the amount due or you make no payment at all for a stipulated time. A forbearance gives you time to save money, get a job or pay off other bills. After the forbearance period, you can start making regular payments to pay off the loan. You may also need to make additional payments to cover the amount that has piled up during the forbearance period.
Short sale
If you owe significantly more money on your home than it is worth, you should not declare bankruptcy because this will not solve your problem. In this, your best option is a short sale. You can hire a real estate specialist to negotiate a short sale agreement with your mortgage firm or lender. This is a great alternative to foreclosure because it helps you avoid damage to your credit score.
Deed-in-lieu of foreclosure
This option is also called a friendly foreclosure and it is just right for you if you have only one mortgage. In this case, you return the deed and the property to the money lender. Instead of facing the hassles of foreclosure with all the credit implications, you simply walk away.
Bring your payments up to date
If you are facing foreclosure, it means you have fallen behind on your mortgage payments. In that case, you can easily solve the problem by bringing your payments up to date. All you have to do is pay your lender the full amount due and you are free from the looming danger of foreclosure. Find a way to raise money and pay what you owe. You should also pay all fees and fines. Once you do this, there will be no need for a foreclosure. It may not be easy to raise the cash but you have to be optimistic and make super human effort. You could get a new job, cash in on other assets or get assistance from family before the final foreclosure date.
Final word
A foreclosure is not in your best interest so you should do everything possible to avoid this. Fortunately, there are smart foreclosure alternatives out there. Discuss your options with a real estate specialist and take advantage of the one that is best for you.