Foreclosure happens when you fail to make your home mortgage payments, or your lender files a Notice of Default (NOD). Your lender uses foreclosure to repossess your house, and if your property is less than what you owe, the bank may pursue a deficiency judgment. If this happens, you could lose your home and owe your bank an additional sum. Furthermore, foreclosure could affect your ability to qualify for credit in the future. Even at this stage, here are five steps to stop foreclosure on your home.

#1. Foreclosure Workout

Up until lenders schedule your home for auction, most of them would prefer that you work out a compromise that would allow you to make payments. Most of the lenders try to avoid foreclosure as much as they can. Some banks will also agree to wait before taking any legal action and allow you to create a repayment plan. Most will advise you to work out a plan that is affordable for you. As a result, it is wise to contact your lender as soon as you realize that you have a repayment problem.

#2. Short Sale

After the bank files a NOD, but before they schedule an auction, you can strike a deal with a buyer. If the lender decides to sell your house and you present them with a reasonable short sale offer, they may consider it since you will be saving them the time needed to look for a client. Even after the lender lists your home for foreclosure, continue to seek a buyer. Contact we buy houses Sacramento to get a market for your home.

#3. Bankruptcy

Filing for bankruptcy prohibits any debt collection including your mortgage. Foreclosure is a debt collection activity, and the time your lender realizes that you are bankrupt, they will immediately freeze the process. However, bankruptcy does not let you off the hook. Instead, it buys you time to recover from your financial crisis. The court demands that the lenders should work with good faith with you to formulate an affordable repayment plan. Make sure you consult with a bankruptcy attorney to determine whether this is a good strategy for you.

#4. Deed in Lieu

The homeowner voluntarily signs an agreement to hand over the home back to the lender. Though this may seem like an ideal option, it has the same effects to your credit score that foreclosure does. Most lenders are also reluctant to repossess the home through a deed in lieu. The bank fears that you can later charge them in court claiming that you did not understand what was happening. As such, the lender insists on paying for any home equity lines of credit before signing a deed in lieu. The bank has to make sure that your financial issue is real. As such, they will not grant any deed for lieu unless the foreclosure is inevitable.

#5. Short Term Rental

The bank may work out an arrangement where you can remain in the house until you find another place. You should then negotiate the right to retain occupancy. The right argues that if the lender follows through on foreclosure, a homeowner can still enjoy the freedom of possession during the procedure. Exercising this right will buy you time to recover from your financial crisis.

If you are facing foreclosure, take time to review your options to make sure that you do not find yourself deep in debt and without a home.