The Texas economy is booming. The housing market is strong. Unemployment is at an all-time low. Even with such a strong economy, this year there were almost 40,000 foreclosure filings in Texas, according to Realty Trac. Layoffs happen, accidents happen, jobs are lost, divorces are filed. There are countless reasons that people may find themselves facing foreclosure.
Justice Home Buyers’ founder himself went through foreclosure and was left with the impact for 10 years. After his experience, he has made it his goal to help as many people as possible avoid foreclosure. Together with our network, we have helped to stop thousands of foreclosures. Through our experience, we’ve learned a lot about what works, and what doesn’t. Below we’ve listed five of our most common strategies used to stop a foreclosure.
1. Reinstate the loan
This is obviously the ideal way to stop your foreclosure. If you are able to do this, you can stay in your home and not worry about changing payments or interest rates. However, if you haven’t been able to pay your mortgage payments, you probably don’t have the 10s of thousands of dollars needed to reinstate just sitting in your bank account. You can, however, look around at your assets and see if there is anything you can liquidate in order to come up with the reinstatement. Do you have a 401k you can borrow against? Do you have a car you can sell? Is there someone you can borrow the money from? In some situations it may be better to cash out part of your 401k instead of letting your house go into foreclosure.
This strategy only works if you are going to be able to make your mortgage payments going forward. It only makes your situation worse if you reinstate the loan, then face foreclosure 6 months later with even less money in your 401k, or 1 less car.
2. Request a loan modification
Banks really don’t want to foreclose. They make much more money from a performing loan than they ever would from foreclosing. For this reason, banks want to work with you. Typically banks are willing to do a loan modification to help you stay in your house. The loan modification may extend your loan or increase your interest rate. Be sure that the new payments are something you can afford going forward.
If you get approved for a loan modification you will have a short trial period. If you miss any of the payments in your trial period, they will reinitiate the foreclosure proceedings. Banks will typically allow two loan modifications over the life of the loan, provided they aren’t too close together.
3. Sell your house for retail
If your home is in good condition, and you have enough equity, you can list your home for sale. You have to be able to move fast with this strategy. In Texas, the bank is only required to give you a 21 day notice that they are foreclosing. However, if you’re starting to fall behind and know foreclosure is around the corner, you can get your house listed quickly and hopefully get an offer before you receive a notice. If your foreclosure is less than 30 days away, it’s very unlikely that a retail sale will be completed in time. But there is good news, banks will sometimes delay a foreclosure if there is a legitimate contract to sell the house.
4. File for bankruptcy
If it is your homestead that is facing foreclosure, you may be able to stop the foreclosure by filing for bankruptcy. This can be done through an attorney, or done on your own. This will stop the foreclosure before the auction date, but in Texas this is not a long term solution. The bank will sue for reinstatement of the foreclosure and you will still be foreclosed on. This means that in the long run you will not only have the foreclosure on your record, but you will also have a bankruptcy on your record, completely destroying your credit.
Starting the bankruptcy filing process is a good strategy for delaying the foreclosure if you just need some extra time. You do not have to complete the filing process, so starting this process will not doom you to having a bankruptcy on your credit report. But you do need to know your next steps after starting this process.
5. Sell to an investor
If you’re short on time, low on equity, and/or your house is not retail ready, your last chance to stop a foreclosure may be to sell to an investor. If you are facing foreclosure in a seller’s market, you’ve probably had several investors knocking on your door, calling you, sending you letters, etc. Some investors know you may be desperate, so they are looking to pounce. Other investors, like Justice Home Buyers, know you may need help and only offer to buy your house after they see no other option is left to stop the foreclosure.
If this is the route you take, it’s important to feel comfortable with the investor you are working with. You should not feel like you are being taken advantage of, you should feel like the investor is looking out for your best interest.
In Summary
Foreclosure is scary. Not only do you lose your home, but you also take a huge hit to your credit for 10 years, which can even affect your ability to get certain jobs. If you are facing foreclosure, don’t just let it happen. You can take action to stop it today. If you need help stopping your foreclosure, call us at (512) 537-7757 and let us help you find the right strategy for you.