3 Alternatives to Avoid Foreclosure

admin | December 8, 2012

English: Sign of the times – Foreclosure (Photo credit: Wikipedia)

Repayment of your mortgage or any other type of loan that you might have taken is one of the biggest financial headaches that you suffer from. The fact that defaulting on repayment of a loan is frowned upon by your lender and continued delinquency will prompt your lender to foreclose on the property adds more pressure to your existing situation. This is why it is important that you are aware of the possible solutions you have in case you are considering defaulting on your existing loan. Here are 3 of the most effective ones:

Short Sale

This happens to be one of the most hassle free and preferred options for people who have defaulted on their mortgage payments. According to the short sale method, you will need to find a buyer for the property you have the loan on. Once you have identified a potential buyer who is ready to purchase the property in a quick manner, you will need to approach the lender with the offer that the buyer has for you.

The offer is usually lesser in amount than what you owe to the lender. In the case that the lender agrees to the deal, you can go ahead with the sale of the property. Remember that the short sale is a popular option but that doesn’t mean your lender will be ready to give you this chance. You might need to negotiate with him and persuade him for the same.

Get Help From The Government

Government help is what most defaulters of loans look forward to as a last resort of sorts where as the authorities step into the situation and try to strike a deal that is beneficial for both parties. There are a number of programs that the government has in place to help people in these situations. One of the most popular ones happens to be HAFA or the Home Affordable Foreclosure Alternatives.

The HAFA program has the authorities trying to strike a deal with the lender wherein they agree to a loan repayment method apart from foreclosure, like a short sale. You might sometime notice that the lender is unwilling to negotiate a deal with you apart from a foreclosure option. Having an ongoing government program on your side might give you the edge in these discussions.

Deed-In-Lieu Of Foreclosure

In case your trying to building your credit score and saving some time is important for you, a deed-in-lieu foreclosure is what you must opt for. According to this option, you will have to hand over the property to the lender voluntarily without them needing to enforce the foreclosure.

The knowledge of these 3 popular alternatives to foreclosure is extremely important not only for the personal homeowner but also for those involved in small business banking. You never know when you run into a rough patch.