Hey there, Mike from Mike Buys Houses. Stopping foreclosure and/or trying to sell your house fast when facing foreclosure is a difficult process to work through, and recently, I have been speaking with a lot of homeowners who have been facing the prospect of foreclosure with many questions. Therefore, I thought I would try and organize some of my videos together to help you find what you might be looking for. This should act as a guide to stop foreclosure now – Let me know if it it helpful! As always, if you are reading something here and have any questions or want to find out if and how it relates to your situation, please fill out the form below or give me a call at 267-984-4765.
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Credit Score Impact
How Does Foreclosure Affect Your Credit Score?
Going through the foreclosure process can have a severe and long term impact on your personal credit score, as your personal credit score will start to be reduced after the first missed payment. If the process of foreclosure continues, the impact will be on your credit score for seven years. A quick look at an estimate on how foreclosure can affect your credit score is below:
|30-90 Days Late||40-110 Point Drop|
|90 Days Late||70-135 Point Drop|
|Foreclosure/Short Sale||85-160 Point Drop|
|Bankruptcy||130-240 Point Drop|
How Long Does a Short Sale Remain on Credit Score
A short sale is when a homeowner sells their home for less money than what is actually owed on the property.
While it doesn’t sound ideal to sell a home that is worth less than is owed on it, this might end up being a good option for you to consider. You will work with the bank in order to find an amount of money that they will accept for the property. If you are facing foreclosure, you need to sell your home and are behind on your payments, this might be an option to consider. It is not the most ideal scenario, as a short sale will be on your credit score for 7 years, but it will be on the lower end of that scale in the chart above. It is worse on your credit score to go through foreclosure than it is to go through a short sale.
How Long to Wait to Buy a Property After Foreclosure?
If you have already gone through foreclosure and you are looking to get another home, you may have some restrictions on how you can approach buying a new home.
- Conventional Loans – At a bare minimum, you are looking at a three year waiting period plus you will need more money down for any purchase. Typically, it is going to be closer to seven years before you have this option.
- FHA and USDA Loans – This is also going to be a minimum of three years. There is a chance to get an extenuating circumstance exception to reduce the wait time to 1 year, but that is very vague and challenging to plan for.
- VA Loan – This is a two year waiting period after foreclosure.
- Alternative Lenders – Private and portfolio lenders will have more relaxed standards and guidelines, and as such, you will end up paying a higher down payment and interest rate, but you can reduce the time you need to wait.
What Happens When You Miss a Mortgage Payment?
Often banks will give a grace period around the first missed payment. If you notice you missed a payment, try and call the bank as soon as you can and discuss it with them. A lot of instances that I have seen, the bank will usually just ask about why you missed the payment, and they will go over options to help you avoid missing payments. You still might face some late fees, but avoiding the credit score impact will be critical. On time payments make up an absurd 35% of your total credit score, so any missed payment is big.
Sometimes when a homeowner is facing foreclosure, it is more advantageous for them to list their house with a realtor. If you have 4-6 months, you might be able to make more money on your home while still avoiding the negative impacts of foreclosure. However, you also might want to consider getting a 48 hour evaluation of your situation to see if a cash offer might be better. If you are facing a tight timeline, then selling to investors might make more sense for your situation.
Best Ways to Prevent Foreclosure
In my opinion, the best way to prevent foreclosure is always to understand all of the options available to you. Too often, we get tunnel vision in these situations. When you are facing foreclosure, generally you have 8 options available to you.
- List with a Realtor
- Get a Personal Loan
- Loan Modification/Refinance
- Make It a Rental
- Renovate and List It
- Cash Sale
- Creative Sale
How Fast Can You Sell Your Home?
How Fast Can I Close?
Sometimes, life happens fast and you may find that you don’t have enough time to sell your property via traditional means, such as listing it with a realtor. In such times, it is important to understand all of the options available to you.
There are a lot of investors who will pay cash for your property, but you will often have to sell it for less than you would if you listed it with a realtor. However, you will often be able to close within a week! Another alternative is to sell your home via terms, where you can act as a bank and receive regular monthly payments for your property. Selling via terms would allow you to sell your house typically for more than you would if you listed with a realtor and you can typically close between one to two weeks.
How Many Missed Payments Before Foreclosure Begins
An important thing to remember when facing the prospect of foreclosure is that the bank doesn’t want to take your house back. They don’t make money that way, and so they will likely be willing to work with you if you are facing any difficulties. Normally, a bank will wait 2-4 months, or about 120 days, before they start the foreclosure process.
This is not something that you should necessarily count on, as each bank and each situation is unique, but typically you will have some time. The bank will also send along a breach letter to notify you that you are behind on your payments. That starts the 30 day process to get your loan current, and if you are not able to get the loan current, the foreclosure process will begin.
How to Sell Your Home
An Underwater House
An underwater house, also referred to as an upside-down mortgage, is when you owe more money on the property than it is currently worth. Now, if you think this might be your situation, don’t worry as the value of a home can change a lot over the lifetime of a mortgage. However, if you happen to face a situation in which you need to sell you home, then you may need to consider some additional options.
A short sale might be an option that you want to consider as well as the option to sell your property as-is via terms. Selling via terms can be a quick and effective option plus it is highly customizable. So, you can get additional benefits even during a trying time.
How to Avoid a Tax Hit When Selling Your Home
I’m not breaking new ground in saying that you will have to pay more in taxes whenever you have a large cash receipt, such as when you receive a lump sum deposit for purchasing a property. A very straightforward way to avoid such a tax impact is to consider selling your property via terms so that you can stretch that property value over a longer period of time, reducing your tax burden. You can often make more on the property in the long run when proceeding down this route.
Stop Foreclosure on My House
There are several approaches to avoiding foreclosure, as I have been mentioning throughout this page. You can always try and sell your property with a realtor, especially if you have some equity in the house. You can also sell to an investor, which will be the fastest option to close but you may need to sell for a bit less than you were hoping to make. Additionally, you can always sell your property via terms and get a creative option to provide you with a fast close, a high sales price, and the property can be moved in any condition.