5 Ways to Avoid Foreclosure to Protect Your Credit Score

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The housing market has gotten crazy. Homes selling for over asking price, sometimes with multiple offers in the mix. Houses going off the market within an hour of going on the market. These are interesting times for real estate. For the homeowner who may have gone through a rough patch, watching home prices skyrocket can feel unnerving.

If they lose their house, can they even afford to rent something in their community anymore? What will happen to their credit score if they can’t afford to pay the mortgage anymore? These are all valid questions, and the good news is that there are options for people who are in a financial predicament that is heading towards foreclosure. There are plenty of ways to avoid foreclosure to protect your credit score, here are 5 of them.

Participate in a Home Sale Leaseback Program

Losing your home can be devastating. Losing one in a foreclosure can make it challenging moving forward to even get a rental property. Property managers often look at credit scores to determine if someone is a good fit for their properties or not. If you recently had a foreclosure, this can make it more difficult to get in a rental. When you don’t have a home and you don’t have a rental, there aren’t a whole lot of other options out there.

Check out an EasyKnock review for a different option. Some innovative companies are not offering customers a home sale lease back option. Basically, they buy the home from the homeowner and the homeowner get to rent or lease the home indefinitely until they can buy it back from the company. This is a great opportunity for homeowners who want to stay in their homes, but because of a few missed payments might end up in foreclosure instead.

Sell Your Home in a Short Sale

A short sale is a sale to a buyer where the bank agrees to settle for a lower price than what’s owed on the home. They short the sale. Banks are often able to do this when the homeowners has paid for the house long enough that there is a little equity in the home, when the homeowner has paid a significant amount in interest, and when they recognize that they would make more on the short sale than they would if they had to auction the home in a foreclosure sale.

Ask Your Lender for a Loan Modification

Another option that can help homeowners avoid a foreclosure is to ask for a loan modification. The lender may be willing to make changes to your existing loan if you can prove a financial hardship. This is not the same as a refinanced loan. A few ways that they can change the loan is to change the type of loan, lengthen the repayment terms, adjust the interest rate, and even reduce the principal balance based on the number of payments you’ve already made.

A loan modification is an excellent way to avoid foreclosure if you’ve hit financial hard times. It’s important to be ready to prove your hardship to the lender and be willing to ask with someone who can help make the determination.

Pursue a Deed in Lieu of Foreclosure

This option can still hurt your credit score, but typically not as much as a foreclosure would. In this option you handover full ownership of the home to the bank. If the home isn’t worth what’s still owed on the loan, you could also be on the hook for the difference between what you owe and the value of the home. For some this is a better option than foreclosure and is worth exploring if you’re in a situation where you are at risk of foreclosing on your home.

Try and Sell Your Home Quickly With a Real Estate Agent

Using a real estate agent is one of the best ways to sell your home quickly if you might be at risk of foreclosure. If the process has not started yet, it’s worth finding out if a local agent can help you get your home on the market and sold in very short order. It’s possible to do if you are willing to sell for only what’s owed and if you do a few staging tasks to ensure the house can sell a little more quickly. 

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