If you have received a default notice, you have a grace period to make the loan current before the lender forecloses and the house goes to auction. That time in between is often called the pre foreclosure period. If you obtain pre foreclosure loans to help you make the account current, then the foreclosure proceedings are terminated and you are back to normal. However, if you don't do that there are other types of pre foreclosure loans that others will offer you to settle your account while selling your house too. It's during this time when investors may try to contact you to buy your property with pre foreclosure loans that can help you get out of a tight spot and leave you with some money in your pocket. It will definitely help you keep your credit in better shape too.
If You Are Already Selling
You may have a real estate agent, but that doesn't mean you can't get a pre foreclosure loan from an interested investor. They will, however, have less leeway to settle a deal with you directly. They will most likely work with your real estate agent who may want some cut of the deal for all their work. If you have not put up the home for sale, you may get contacted directly to see if you would be willing to do a pre foreclosure deal.
Why Pre foreclosure Loans?
Pre foreclosure loans are a great way to stop foreclosure in its track. The lender doesn't care where you get the money from, they just care that your account is current. So, if you find a private lender who will offer you a pre foreclosure loan, you might be able to save the home. Or, if you want to sell quickly, then a private investor can offer you a pre foreclosure loan which is discount 15 to 20% of the value of the home to pay off the loan and sell it to them directly. If you have significant equity in the home, it might be preferable to lose a bit on the sale of the house and keep your credit intact, then it would be for you to default on the mortgage completely. Pre foreclosure loans offer you a way out when things are very rough and you are having trouble selling your home. Typically, you will only have a set period, which can vary with every situation, from when you receive a foreclosure notice to when the house goes to auction. If you can't sell through conventional means, then letting go some of the equity in exchange for a fast sale can be the answer.
The great myth about foreclosure is that you won't be able to own another home after you experience foreclosure. This simply isn't true. There is a way to get mortgage loans after foreclosure, but it can depend on exactly how well you negotiated your way out of the house that was foreclosed upon. The deals you get on mortgage loans after foreclosure may not be ideal, but they certainly won't be nonexistent either. If your goal is to own a home, but you overextended yourself or lost a previous house due to medical bills or a loss of a job, you have options to get mortgage loans after foreclosure if you want to get back in the market.
Extenuating Circumstances
Typically, lenders will be more willing to lessen the waiting period after a foreclosure for those people who lost their home due to illness or a loss of a job. If that issue has been resolved and you have a new job for the last couple of years, you can easily qualify for a new mortgage. Or, if the medical issue has been paid off or resolved, then that also can help to clean up your record much quicker. The foreclosure information will still be on the record, but again, if the lender has managed to sell the house and recoup most of the costs, and your situation has improved dramatically, you may be eligible for another loan in as little as two years. Although, if you really want to get back in the market you can get mortgage loans after foreclosure as soon as a year afterwards if you are willing to pay higher interest rates, a large down payment, and many more origination points on the loan.
The Cost of Foreclosure
Essentially, mortgage loans after foreclosure will be more expensive to obtain. The impact of the foreclosure on your FICO score will begin to fade over the years, so time is the best healing agent in this case to get good mortgage loans after foreclosure that aren't too prohibitively expensive. If you just can't wait, for some reason, you will have to be satisfied knowing that you will have to have at least a 20% down payment (if not more) and pay much higher interest rates on the loan. This can significantly increase the price of the home once the life of the loan is complete. Not only will mortgage loans after foreclosure have higher term costs, but the impact of the foreclosure on your credit score will leak into areas like insurance and automobile loans too. You will find that you will be required to pay more across the board for having foreclosed on your home.
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