Foreclosure is a scary situation for any homeowner.
It usually occurs when a homeowner stops making payments on their mortgage loan.
Since mortgaged are secured loans, this means that the property will serve as collateral for the amount borrowed.
The lending institution, therefore, recovers their debt by seizing the house and selling it.
In today’s economy, falling behind in your mortgage payments is a very likely scenario. However, in Texas, the laws here make it extremely easy for mortgage lenders to foreclose on homeowners who default on their obligations.
It is, therefore, necessary to learn how to prevent a potential foreclosure even if you have fallen slightly short on your payments.
Why Is It So Easy to Get Foreclosed in Texas?
The reason why Texas is one of the hardest states for mortgage borrowers is due to its non-judicial foreclosure process. Non-judicial means that the courts do not have to be involved in the process. The only loans in Texas that require a Judicial foreclosure are Home Equity Loans.
When a court is involved in the foreclosure process, the court hearings and notice typically slow down the process. This benefits the borrower as it gives them a significant amount of time to come up with a solution to prevent the foreclosure.
The following guide is tips and advice from a hard money lender on how to avoid getting foreclosed.
- Talk to Your Lender Early
It is much easier to talk to your lender when the foreclosure process is still in its early stages. At this stage, your lender will be willing to listen to you and even give you advice on how to stop the foreclosure.
However, you need to be entirely honest with them regarding your present financial situation. Do not shy away from telling the truth even if that truth is that you are no longer able to make your payments.
Most lenders will give you advice on what to do to avoid the foreclosure. Some may even change the terms of your mortgage so you can make lower payments.
If you are sure that your financial problems are temporary, talking to your lender is important as they might give you a forbearance. A forbearance allows you to delay some payments until you are back on your feet.
- Ensure that You Open and Respond to Mails from Your Lender
Borrowers facing a difficult time might be tempted to ignore mail from their lenders when they start defaulting on their payments.
This does not help you in any sort of way. In fact, the first mail that your lender sends you is usually information concerning foreclosure prevention methods that might help you.
Subsequent mail is usually a notice of pending legal action. This is why it is recommended that you work with your lender while being honest to improve your chances.
Ignoring their mail leaves a bad taste, and when they decide to pursue legal action, failure to open mail cannot be used as an excuse.
- Know Your Rights
Some lenders might take advantage of your lack of knowledge.
To avoid this, look for your loan documents and study them to see what options the lender has in case you cannot make your payments.
Also, foreclosure laws are different in every state, and that is why you should learn the specifics that apply to you. Utilize this resource.
- Talk to a HUD Counselor
The U.S. Department of Housing and Urban Development (HUD) may help you avoid foreclosure in various ways. A HUD counselor will help you understand your options, help you organize your finances, and help you talk to your lender and negotiate a more affordable payment plan.
Utilize this resource to locate a HUD-approved housing counselor near you.
- Prioritize Your Spending
The most important priority after health care is keeping your home. This means that you need to do a review of your finances to see places you can cut or reduce spending so that you do not compromise your mortgage payments.
Consider cutting discretionary expenses such as memberships and cable TV. Also, consider delaying payments on credit cards as well as other unsecured debts until you have paid your mortgage.
- Utilize Your Assets
If you have assets such as jewelry or a second car, think about selling those things to get money to help reinstate your loan. Also, are there people in the household who can get a job or two to try and get supplemental income?
If after making these efforts you are still not able to significantly improve your financial situation, they will communicate to your lender that you are willing to go any length possible not to lose your house.
- Be Wary of Foreclosure Prevention Companies
Some firms will come to you with the promise of negotiating a deal with your lender, so you do not get foreclosed. While some might be legitimate, they often ask for hefty amounts that could be worth three-month mortgage payments. Yet, they will only be giving you the same advice that you would have gotten from a HUD Counselor.
Use that money to pay your mortgage instead.
Getting a foreclosure notice and potentially losing your home is one of the most challenging moments of a homeowner’s life. Utilize the above tips to help prevent foreclosure.
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