If your home is facing foreclosure, you need to look into what the best options are to make sure you keep your financial status in a good spot. There are a few things you can do to make sure you keep your equity at a reasonable level without letting your home fall into the hands of the bank. If you are facing foreclosure in Tennessee, keep reading to see all the ways that you can help yourself get out of this sticky situation.
What does it mean if my home is in foreclosure?
If you fail to make your mortgage payments on time or don't pay the total amount, your home can go into foreclosure. This means that you no longer are the homeowner, and your home will be turned over to the bank so they can attempt to make money back. If your home goes into foreclosure, it will affect your credit score and likely make you unable to purchase a new home for a while.
In Tennessee, all home sales will require the new buyer to sign two separate documents when they agree to buy the home. One is called a promissory note which is basically a document that delegates the terms of your loan and makes you promise to pay it back to the lender. The deed of trust is similar, but this is more for the lender, and it is the document that allows the sale to be turned back over to the bank if the payments aren't made.
How long will it be until my home goes into foreclosure?
If you happen to miss a payment, you don't need to start packing your bags right away. Most lenders will give you a grace period of up to 15 days, and then they will start to charge you interest on your payment. This all depends on the agreement of your promissory note, so it's a good idea to review it well before you sign it.
After a few missed payments, you will likely be contacted by someone from your lending company that will try and helps you work out an alternative to foreclosure. By law, the lender will need to give you the options and make an attempt to help you with "loss mitigation." If you are unable to make a payment or come to an agreement, the bank will put the home on the market no earlier than 120 days after your last missed payment.
The laws in Tennessee also require them to send you a letter to inform you that you are breaching the loan. This is called a "breach letter," and if you do not respond to it, the loan holder may be able to make the rest of your mortgage due immediately to start the foreclosure process.
What should I do if I know I can't pay my mortgage anymore?
There are plenty of circumstances that might make it tricky for you to make your entire payments on time, and if you think you won't be able to continue paying, the best option is to look for help before it gets any worse. Foreclosing on a mortgage can hurt you in many different ways, so it's best to avoid it if you can.
If you think you might be missing a few upcoming payments, then you can try to contact your lender. They can sometimes work out a solution with you if you are usually on time with your regular payments. The options they give you will highly depend on the lender you are with, but some might offer to pause or reduce your payments until you are able to catch up and pay it all back.
If you have good credit, you also might be able to refinance your mortgage, but you will need to find a rate lower than your current one. A loan expert might be able to find a loan with a lower rate, but this often means getting a longer length for your payments. A new loan won't be free either, and it will likely incur some closing costs that you will need to pay back, so if you are trying to save money, you will still need to spend quite a bit before you start seeing any money being saved.
One of the best ways to make sure you won't be defaulting anymore is to find a home with a lower mortgage rate and put yours up for sale. This is the best way to make sure that you are not getting stuck with a foreclosure on your credit score record. An agent will be able to work with you and help you figure out a quick sale option to make sure you aren't stuck paying your higher mortgage forever.
If you are an investment property owner, you might want to consider declaring bankruptcy. An investment property foreclosure is slightly different than a personal foreclosure and declaring bankruptcy might stop the process, which could allow you to keep your property. Talk to a property lawyer about what your options are if you are having issues paying the mortgage on your investment property.
Should I let the bank take my home?
Foreclosure can be a stressful and exhausting issue to deal with, and you might even feel like it is unjustified. You can fight the foreclosure in court if you want to, but the court rarely agrees with the buyer, so it might be a waste of time and money. If you allow the bank to take your home, this still doesn't mean you are debt free.
If you owe $100,000 on a home worth $250,000 and the bank happens to seize it and sell it for $50,000, guess who will be on the hook for the other $50k? This is called a "deficiency balance," and it is only proven if the lender can show that your home is still worth the amount you originally had it quoted at. If your home value has decreased dramatically, then you might be off the hook for this, but that doesn't mean it won't affect your credit score.
If you have a foreclosure marked on your credit score, it will stay there for seven years, which will make it difficult to borrow money which means you might not be able to afford a new mortgage. How much the foreclosure affects your score will depend on what it looked like beforehand, but any major lender will see the foreclosure as a significant red flag. Unless you actively work your credit score back up to a good number, you will likely end up paying a much higher rate on any loans than you would before you defaulted.
What's my best option?
A real estate agent is one of the best people you turn to in this situation, and they are experts at making sure your home sells as quickly as possible. Many agents are experts in the field of foreclosure, and they can usually let you know what your options are before you start to worry.
Selling your home quickly is something that requires skill and knowledge in the local real estate market, and an agent will help you navigate the sale so that you can get rid of your house as soon as you can. Many buyers are looking to purchase some of the great smoky mountain foreclosures in Tennessee, so it will likely be a quick sale for everyone involved. It's much better to sell your home, even if it's at a cost that is lower than you'd like, as it will keep your credit score and equity in a much better place.
Keep in mind that some home sales can take a few months to complete, so if you are thinking about selling, you should start the process before the foreclosure notices start coming in. Your agent might even be able to help you find a new home to move into that is going to fit your budget much better than your current home. The sooner you get in touch with an agent about selling your home, the smoother the process will be.
If your home falls into foreclosure, it can damage your ability to borrow money, get a new home or get financing for leases on vehicles, along with putting a dent in your credit score. It's also a stressful process that can end up costing you money, so it's best to do whatever you can to avoid it. A local agent can help you in so many ways, and selling your home to prevent foreclosure is one of the best ways to keep your credit and your worries intact.