Facing foreclosure can be stressful. The idea of losing your home to foreclosure can leave you scrambling for a solution to keep your home. You may have come across the idea of getting a loan to stop foreclosure. Still, as experienced foreclosure attorneys, we strongly caution anyone who thinks about pursuing that path to save their home.
You may get a loan to stop foreclosure, but it’s usually not the best path toward saving your home. It’s important to carefully consider your options for stopping foreclosure. Getting a loan to stop foreclosure can be difficult and risky.
Before you consider using a loan to stop foreclosure, you may be able to stop foreclosure if your lender made mistakes, violated RESPA, or other common mortgage errors. There are a number of other paths you can follow to stop foreclosure that you’ll want to explore first.
A foreclosure attorney can help you sort through all of your options to stop foreclosure and decide what’s the best option for you. Contact Denbeaux Law today to learn about how we may be able to help you stop home foreclosure.
Loans To Help Stop Foreclosure
Getting a loan to avoid foreclosure isn’t an easy task, especially if you’re already struggling financially. If you are facing foreclosure, you may get a lot of fraudulent offers from fake lenders who take advantage of homeowners. There aren’t really loans to save a home from foreclosure.
Conventional loans can be used to pay off your mortgage—but they come with lots of extra costs you likely don’t have the money to cover, like closing costs, origination fees, and more. It’s extremely rare for a legitimate mortgage lender to lend to someone who is worried about facing foreclosure in the near future and unheard of when someone is already being foreclosed on.
In general, loans to stop foreclosure are a scam you need to know about so you don’t fall victim to common foreclosure scams.
Things To Look Out For in Foreclosure Loans
Some common foreclosure bail-out scams prey on unsuspecting homeowners looking for loans to stop home foreclosure, which you should be aware of and look out for.
If a lender offers you a HAMP modification, this is not an agreement you should take. A HAMP modification was a government loan modification program intended to minimize the impact of the 2008 mortgage crisis. This program ended in 2016, so any current HAMP modification offers are fraudulent.
You should be wary of a lender asking for advance payments, too. It’s not common for lenders to ask for payment before receiving services or seeing paperwork. A lender knows you need money, so a legitimate lender isn’t likely to ask you for payment before receiving the loan funds.
A loan modification is a good option to avoid foreclosure, but any third-party offers to modify your loan are scams. Only the lender you have your loan with can modify your existing mortgage.
There are rules for how lenders can interact with you while you’re considering a loan. If you feel like a lender is pressuring you into agreeing to a loan, moving on or contacting an attorney is a good idea. Being pressured into taking a loan by a lender is often a sign that it is not a good loan.
Refinance Loan to Stop Foreclosure
Refinancing a loan is when you take out a new loan to repay your existing loan. You can take out a refinance loan with any lender, which means you shop around with lenders for the best rates. You may think this is a great idea if your mortgage rate is higher than the current rates and you’re struggling to pay your mortgage.
It’s an appealing idea that starting over with a new loan could give you the opportunity to have more manageable mortgage payments.
A refinance loan extends the length of your repayment period. This can lower your monthly payments, but it could also mean that you’ll pay more in interest over the life of your loan.
However, if you’re already short on cash, refinancing usually requires paying closing costs and fees up front you’ll need to pay immediately. If you have enough money to pay closing costs to refinance your loan, it may be smarter to try other methods to stop foreclosure that cost less in the long run, like a loan modification.
Refinancing your mortgage to avoid foreclosure can be difficult. It might be hard to find a lender who will agree to refinance your mortgage. If you can find a lender, time might be an issue. It takes time to get a refinance loan. By the time you can get your loan, it may be too late to stop foreclosure on your home.
Instead, negotiating with your current lender for a better rate, payment terms, or monthly payment in a loan modification gets you the fresh start you’re looking for without the added costs of closing costs and fees. As well, a lender isn’t allowed to foreclose on your home during a loan modification negotiation, protecting your home while you get your finances sorted out.
With a reverse mortgage, you pre-sell the equity in your home to cover your defaulted mortgage loan. Your mortgage lender could pay you in a lump sum, monthly payments, or a line of credit in exchange for ownership of the equity in your home.
Reverse mortgages tend to have more rules than other types of loans. Most reverse mortgages require the homeowner to be at least 62 years old and own the home outright or have a significant amount of equity in the home.
For a reverse mortgage, your loan amount is limited to the current amount of equity you have in your home. While you could use a reverse mortgage to pay off delinquent payments and get up to date on your mortgage, there are big risks with using this strategy.
If you’re considering a reverse mortgage, it’s important to make sure that you don’t plan on your family keeping your home in the future. When a homeowner passes away or moves out of a home with a reverse mortgage, the mortgage company will take possession of the property.
Reverse mortgages also usually have upfront fees associated with them, like origination fees, closing costs, and more. This isn’t usually the best option if you’re facing foreclosure for the same reasons as a refinance loan.
Foreclosure Bail-Out Loan
A foreclosure bail-out loan replaces your current mortgage with a new one, but these are purely scam loans meant to take advantage of consumers in tough situations. These loans usually have an exorbitantly high-interest rate, and you’ll need to have substantial equity in your home to qualify.
Foreclosure bail-out loans can have high interest rates and origination fees, meaning you pay a lot to open the loan and have harsh prepayment penalties. Prepayment penalties can make it difficult to pay back your loan early or if you’re struggling to make payments because you’ll end up paying a lot in fees.
There are no bones about it: foreclosure bail-out loans are predatory loans that are scams. Your mortgage lender won’t offer you a foreclosure bail-out loan.
Fake lenders may also offer to buy out your mortgage and rent the home back to you in a foreclosure bail-out scheme, which could result in you not owning your home. They take your money and leave you in worse shape. These scammers are known to raise rents until you can’t afford to live in the home, forcing you to move out. Very quickly, you can go from owning a home in a tough spot but with some equity built up to without a place to live with no equity to show for your past payments.
It’s common for foreclosure bail-out loans and similar related marketing messages to be predatory, so be careful if you’re looking for alternative solutions to save your home.
Better Legitimate Options for Stopping Foreclosure
If a loan doesn’t seem like the best option for you, there are other ways to save a home from foreclosure.
Loan modifications are an agreement between you and your lender that changes the terms of your loan. Getting a loan modification can lower your monthly payments or extend the length of your loan to help make your mortgage more affordable.
A short sale is a sale of your home to avoid foreclosure. Short sales are intended to pay off your mortgage by selling your home. They can be difficult because the sale has to be approved by your lender, and you must meet many requirements. With a short sale, you may not make enough to pay off your mortgage fully, and you still owe your lender.
Filing for bankruptcy is another alternative to stop foreclosure. Using bankruptcy to avoid foreclosure isn’t recommended. Filing for bankruptcy will hurt your credit and stay on your credit report for up to seven years, making it more difficult to get credit or another mortgage in the future.
Ultimately, a loan modification is usually the best path forward if you’re considering another loan to save your home. We offer free consultations to help you look at better, more legitimate options to stop foreclosure and save your home.
Contact a Foreclosure Attorney Today
Facing foreclosure and a mortgage you can’t afford can be overwhelming. Some options can help you avoid foreclosure, but there are also a lot of scams that prey on vulnerable homeowners.
A foreclosure attorney can help you work through your options and help you decide what’s a real option to avoid foreclosure and what’s the best fit for you.
Contact Joshua Denbeaux today to learn more about how we may be able to help you avoid foreclosure.