When you bought your home, chances are you never thought you’d be in a situation where you couldn’t pay the mortgage.
But the truth is, thousands of MN homes enter the foreclosure process each year because people can’t make their monthly payments.
And while Minnesota foreclosures have reached their lowest levels in decades, no one is safe when it comes to bank-seized homes. After all, you never know when a financial crisis will hit and you won’t be able to pay your mortgage.
Falling behind on your MN home mortgage can be stressful. Not only do have to worry about an impending foreclosure, you have to worry about where you’re going to live.
If you’re struggling to make your mortgage payments, take a look at some of the most effective ways to prevent foreclosure.
What is a Foreclosure?
A foreclosure is when your lender initiates the legal process to claim ownership of your home because you haven’t paid the loan as agreed.
Some people think that a foreclosure is when a bank takes back a home from someone that isn’t paying their mortgage. But the reality is, banks don’t own homes. They simply lend money to people that want to buy homes that can’t purchase them outright.
So, when someone stops paying back their mortgage loan, the bank seizes the property to recoup their losses.
People stop paying their mortgages for many reasons:
- Laid off, fired, or quit job
- Sudden illness or medical emergency
- Divorce or other loss of second income
- Death in the family
- Job transfers to another city or state
- Expensive maintenance issues
- Mounting bills and excessive debt
- Balloon payments are due
It doesn’t matter why you can’t pay your mortgage. The point is, if you find yourself facing a foreclosure, you have to know what to do right away.
If you don’t, you risk losing your home and owing more money. Plus, your future will be much harder long after the foreclosure process finishes.
Let’s take a look at how to prevent foreclosure in MN so you can get out of financial trouble and move on with your life.
How to Prevent Foreclosure in MN
1. Talk to Your Lender
Sometimes the best way to get out of sticky financial crisis is to talk to the person you owe money to. In this case, you’ll need to talk to the person that agreed to loan you the money: your lender.
Lenders approve mortgage loans, not because they’re nice and want to help you buy your first home. They lend you money because they know they’ll make a killing off the interest they charge as you pay the loan back.
In fact, lenders want your money and the accrued interest because that’s how they stay in business. And they know that if your home goes to foreclosure, there’s a good chance they’ll never collect on the full loan amount.
If your lender feels you have a legitimate and temporary reason for not paying your mortgage, they might be willing to work with you.
For instance, your bank lender might offer the following solutions:
- Forbearance. Waiting to take legal action to see if you can catch up on payments.
- Debt Forgiveness. Although rare, some lenders might grant you reprieve from making a few payments.
- Partial Claim. Some people can apply for another loan, which will pay back the missed payments.
- Repayment Plan. Adding a small amount to your monthly mortgage for a period of time to make up for the few payments you’ve missed.
- Note Modification. If you have an adjustable loan, you lender may be able to freeze interest rates from adjusting.
- Refinance. Using the equity in your home, increase your loan balance to include back payments.
You should know, if your lender feels they can’t help you, they’ll start the foreclosure process immediately. So, the minute you think you might not be able to pay up, contact your bank.
2. Learn Your Rights
You may not know it, but even when facing a foreclosure, you have mortgage rights.
It’s important you understand exactly what will happen if you stop making payments on your home. And you can find this information in your mortgage documents.
Find information about whether you’re allowed to reinstate the loan by catching up on past due payments. Find out what the monthly late charges are and how that will affect future payments. And lastly, find out what other fees your lender can charge when you fall behind on your mortgage.
Here’s a brief outline of how a foreclosure works in Minnesota:
- Notice of Default: Written notice to the homeowner that a foreclosure is starting. The homeowner will have 30 days to fix the default.
- Foreclosure Prevention Counseling: The lender informs the homeowner that foreclosure prevention services are available. The homeowner’s information will be sent to an approved foreclosure prevention agency.
- Notice of Sale: Notice that the house will be up for sale in 6 weeks. The homeowner must be given 4 weeks’ notice of the upcoming sale.
- Foreclosure Advice: With the Notice of Sale, the lender provides information about how to prevent foreclosure in MN. There is also information about what will happen after the foreclosure sale.
As you can see, even though you aren’t paying your mortgage, people want to help.
3. File for Bankruptcy
This may seem extreme, but if you’re in a financial situation you can’t fix, sometimes bankruptcy is the only option.
Once you file for bankruptcy, the federal law prohibits any debt collectors (even your lender) from collecting unpaid debts.
The problem is, some people are under the impression that filing for bankruptcy wipes away all existing debt. But that’s not the case.
When you go to court for bankruptcy proceedings, decisions about how to handle debt are made between you and your creditors. The court just plays mediator.
Creditors such as your mortgage lender have to work in good faith with you to set up a repayment plan. But you don’t just walk away from the debt. You’ll have to repay your debts after you get back on track financially.
If you’re wondering how to prevent foreclosure, you might be thinking about filing for bankruptcy. If this is the case, it’s best to enlist an experienced bankruptcy attorney to help.
4. Sell Your House Fast
One of the best ways to prevent foreclosure in MN is to sell your house before a foreclosure starts.
To do this, the first thing you’ll need to do is get your house appraised so you know how much it’s worth. Things such as location, size and amenities, and the current market will determine how much your house is worth.
If your house is worth more than you owe, sell it and use the proceeds to pay off your loan.
If your home is worth less than you owe on it, you’ll have to talk to your lender about a short sale. A short sale is when you sell your house for less than is owed on the mortgage loan. From there, the bank might:
- Forgive the extra debt on your loan
- Send you to collections to collect the remaining balance of the loan
- Collect the remaining balance of the loan themselves
If you don’t want to deal with the hassle of selling your home or convincing your lender to allow a short sale, you might consider selling it “as is” to a company such as Homestead Road.
At Homestead Road, we understand that financial troubles creep up on even the most responsible of homeowners. We also know how stressful it can be trying to sell your home fast while competing against your lender who is trying to start a foreclosure.
That’s why we’ve developed a hassle-free way to sell your house in “as is” condition, for a fair all cash price. This way, you can pay your mortgage off and move forward with your life.
Selling your house to us requires very little work on your part. For example, you don’t have to deal with finding a real estate agent, making repairs, or even cleaning. We simply take a look at your house, offer you a fair cash offer, and you either take it or leave it.
If you’re looking to prevent foreclosure in MN, and aren’t sure how to ditch your house fast, contact Homestead Road and see how we can help.
We aim to take the complications out of selling your house, especially when you’re on the fast track to get rid of it. So, get in touch today and stop worrying about an impending foreclosure. Instead, sell your house fast, get your finances in order, and return to your normal life, free from the pressure of a looming mortgage payment you can’t pay.