Local Pennsylvania homeowners who are facing a financial challenge may find themselves in foreclosure.
Foreclosure is when the mortgage loan doesn’t get paid back, and the bank begins the process to take ownership of the property to recoup its losses.
If you find yourself entering the foreclosure process, you might wonder if there is anything you can do about it.
In this blog post, you’ll read about a few foreclosure prevention measures in Philadelphia that you can take to keep your home from foreclosure.
The consequences of foreclosure can be devastating to homeowners. The biggest impact for someone who loses their home to foreclosure is the effect on their credit score. Your credit score can drop by more than 100 points. It is known that the higher your credit score the more effect you will notice. This type of drop-in credit score will last for more than three years. It will be shown to anyone that takes a quick glance at your credit.
It can affect you by buying a new home and by renting. Each landlord will see the foreclosure history on your credit report and think twice about renting to you.
Most people do not realize the tax consequences you will face. After they close on your home, anytime debt is forgiven; it is considered a taxable event. Any borrowed money that is not paid back is considered income, and you can be taxed on this amount if the bank does not receive the total amount they are owed. They can come after you for the additional amount they are owed. You can imagine how stressful it is if you just lost your home to foreclosure you have nowhere to go then now you are being sued for a hefty amount. If you get stuck in this type of situation, you may be wondering if there is a way to prevent foreclosure?
Foreclosure prevention measures in Philadelphia, Pennsylvania
These foreclosure prevention measures might not all work in your situation, but we’re telling you about them so you can decide for yourself:
1. Pay off your mortgage / sell your property. The quickest and easiest way to end the foreclosure process is to pay off your mortgage. After all, this is all the banks wanted in the first place, so they would be happy to let you stay in your home and they get their money back. Admittedly, this is not always possible, which is perhaps the reason that you’re in foreclosure in the first place. You can sell your property to a cash home buyer. They buy houses that are in pre-foreclosure all the time. They can close quickly and usually before a bank can finish a foreclosure process.
2. Work out a deal with your bank. Mortgagors do not want to foreclose on homes. It is a long-drawn-out process. Sometimes you can work out a deal with your bank where you sit down with a mortgage or foreclosure specialist and talk to them about changing the structure of your mortgage. Perhaps your payments get spread out so they are lower each month, for example. Just make sure that the deal works for you — you don’t want just to repeat the process.
3. Do a short sale. A short sale is when you sell the property and use the proceeds of the sale to pay down or pay off your outstanding amount with the bank. This keeps a foreclosure from impacting your credit score and it gets the bank off your back! If you work with an experienced real estate agent that has tons of Knowledge about this process. Then you should have no problem getting your home sold.
4. Give your deed in lieu. Another option would be a deed-in-lieu-of-foreclosure, which basically means that you will hand over the deed to your house to the bank and they agree not to put you through foreclosure. This will often only work if your home is worth approximately the amount owing on the mortgage. If not, the bank may pursue the difference.
5. File for bankruptcy. In some ways, a default is far more dramatic than a foreclosure because it impacts your whole life. However, the foreclosure process has to stop once you file for bankruptcy, so it’s still a foreclosure prevention measure.
If you’re not sure which one to do, consider this: If you can afford payments and you want to stay in the house then a foreclosure workout arrangement (#2) is probably your best option.
If you want to put everything behind you and move on with your life then consider selling your home and paying off your mortgage with that money.