The joy of owning your home is immeasurable. However, life happens, and sometimes situations like job loss can make it hard to make monthly mortgage payments. And being a few months late on your payments may put you at risk of your bank foreclosing on your home.
Foreclosure is the worst nightmare for any homeowner. Apart from rendering you homeless, this process brutally hurts your credit score, denying you the chance to receive financing from other funding institutions for a long time.
Thanks to information and available resources, you have several options to secure your home from repossession and mitigate the losses. Even when losing your home is inevitable, we discuss options to help secure your credit score and protect your reputation if you need funding from any creditor.
Are you facing the possibility of your bank foreclosing on your home? Here, we provide effective tips to avoid house foreclosure in MN. Read on to secure your most valuable asset.
How To Stop Foreclosure at the Last Minute
Foreclosure refers to the legal process in which a bank or mortgage lender repossesses and sells your home to cover their losses when you stop making the monthly payments. It’s not a one-day process. When you miss your payment for a month, your bank will issue you with reminders to pay, plus possible repercussions.
Missing three months of payments will earn you threats from the mortgage company. The bank will then start processing foreclosure. In Minnesota, this can take up to six months. If you don’t act, the lender will sell your home to cover the losses.
But it doesn’t have to get to that.
The best way to stop foreclosure is to clear the missed payments and be consistent with your monthly disbursements. However, medical emergencies, unexpected job losses, and financial crises can make the process hard. Here are some last-minute strategies to stop foreclosure, especially if you cannot make the payments.
Also, you can consider our “we buy houses Minneapolis” service and sell your home and cover the loan.
Remortgaging Your House
Remortgaging a home entails moving your home loan to a new creditor or striking a new deal with your current lender. Moving to a new mortgage is one of the best options to stop foreclosure, as the new lender will help you clear off your old mortgage. You’ll start paying your home loan to them instead of your initial lender. However, it’s best to remember that this will attract a lot of additional charges.
Alternatively, you can talk your current lender into remortgaging your home. In that case, you’ll agree on new interest rates and adjust your monthly payments. Remortgaging works best if your foreclosure resulted from a financial crisis, like a medical emergency you’ve sorted out, and you can continue paying the home loan.
However, if the cause of your defaulting is permanent or extends beyond the time of foreclosure, you may need to weigh your options. Check the rest of the tips to see what works best.
Filing a Lawsuit
And when remortgaging doesn’t feel like the best approach, a lawsuit is a better way to stop foreclosure at the last minute in Minnesota. Find a reliable real estate attorney to guide you through the lawsuit and give you legal advice.
The right approach to take with your lawsuit depends on how the bank processes the foreclosure. Here are the two possible cases.
Judicial Foreclosure
Judicial foreclosure involves the lender filing lawsuit and foreclosing your home via the court. It’s always the best foreclosure to appeal since you’ll only require satisfactory answers that show the court why the lender shouldn’t foreclose on you.
Strong evidence showing why the bank made an error initiating the foreclosure can help you nullify the process and prompt them to start over again. Also, you can find a way to save your home from foreclosure through options like getting a loan modification. Some of the issues you can argue with when answering a foreclosure complaint include:
- The bank didn’t follow the right procedure for foreclosure
- They illegally rushed the process
- You didn’t receive a breach letter from the lender before they started processing the foreclosure
- The foreclosure relied on false information
Non-Judicial Foreclosure
The law allows your lender to process foreclosure without involving the courts. Unlike the previous option, a non-judicial foreclosure lawsuit is costly and complex. Here, you interrupt foreclosure proceedings with reasons you feel the process should stop.
Thus, you’ll have to part with some money. Also, you should include a motion for temporary restraining the sale of your home until your case is heard and decided. Likewise, you need to prove beyond doubt why the foreclosure should not proceed.
Some issues that can stop foreclosure at the last minute through lawsuits include:
- The bank violated any state law
- The lender can’t prove their ownership of the promissory note
- The bank didn’t follow the right foreclosure process
- They skipped state mediation requirements
- There are grievous errors in the foreclosure
While the lawsuit is an effective way to stop a foreclosure sale, you need to reconsider the decision and be sure it will succeed. For instance, foreclosure lawsuits are relatively costly and time-consuming. Thus, you don’t want to spend time and money on the whole process, especially if it won’t yield any fruits. Remember, you’ll only delay the foreclosure if you can prove your claims.
File for Bankruptcy
Depending on your situation, your lawyer can help you reinstate your mortgage payment plan or declare bankruptcy to stall the foreclosure. The latter option works best if you have no time. It’s an effective way to stop foreclosure. However, you need to understand how bankruptcy, both Chapter 7 and Chapter 13, works and which option is ideal for your situation.
Chapter 13 bankruptcy, for instance, gives you ample time (between 3 and 5 years) to pay your past due and catch up with the monthly disbursements. Chapter 7 bankruptcy, on the other hand, is a liquidation option and only viable if you’re ready to let the bankruptcy trustee sell the home and pay the debt. Work with a reliable bankruptcy attorney to avoid mistakes.
Getting a Deed in Lieu of Foreclosure
A deed in lieu of foreclosure is also an effective way to stop foreclosure at the last minute in Minnesota. In this case, you voluntarily turn over your homeownership to your lender. In exchange, your lender releases you from the home loan obligation. While it may also appear on your credit report, getting a deed in lieu of foreclosure doesn’t damage your credit score as foreclosure will do.
After giving out the deed, the creditor lifts their lien on the property and recovers the losses without subjecting you to foreclosure. Also, this option may save you the burden of paying the extra balance on your mortgage. But that doesn’t apply to all lenders, as some will still require you to pay the deficiency (the difference between the value of your home and what you owe).
Thus, you should ask your lender if getting a deed in lieu waves the deficiency or if you’ll need to cover the balance even after vacating the home.
Still, some situations may make your lender refuse to accept your deed. Banks know how hard it is selling a house with a lien and are cautious not to get caught in the struggle. Some of the issues that make it hard for lenders to accept deeds in lieu of foreclosure include the following.
- Any liens and tax judgments on the home
- Depreciated value
- Home in poor condition
Stopping a Foreclosure Tips
Apart from the three major ways, there are numerous options to help you stop foreclosure at the last minute in Minnesota. Here are some ways to stop foreclosure.
Request a Forbearance
Mortgage forbearance allows you to stop your monthly payments until you recover from your financial struggles. You can use the breathing period to order your finances and gain your feet before you resume paying the monthly mortgage installments.
Seek Loan modification
A loan modification is another effective way to stop foreclosure. It involves changing your loan repayment plan, like extending the duration or reducing the monthly installments.
While applying for loan modification early is best, you’re not limited even if you decide to work on it at the last minute. Upon approval, loan modification stops foreclosure until you halt making the payments again.
Consider a Short Sale
And if no payment adjusting or restructuring options work for you, a short sale should help you stop foreclosure at the last minute in Minnesota. In this case, you talk your lender into allowing you to sell the home at a price less than your home loan and use the proceeds to cover the mortgage. Depending on your agreements, the lender will forgive either part of or the entire balance of what you owe after covering a share of their losses from the short sale.
A short sale may be complicated, especially if you need the right knowledge and experience to handle such issues. Thus, it’s best to work with a seasoned real estate agent to guide and help you find a cash buyer quickly.
Alternatively, consider cash home buyers in Minnesota and sell your home without a struggle.
Stop Foreclosure at the Last Minute in Minnesota: Final Thoughts
Foreclosure comes with repercussions that no homeowner wants to experience. One of the biggest fears is its negative impact on your credit reports. While it may be scary, you can easily solve it, especially if you have the knowledge and resources required.
This article has offered some tips to stop foreclosure at the last minute in Minnesota. Do you want more insights into real estate, looking for a stress-free option to sell a house fast in Coon Rapids, or want a specialist to guide you through the process? Mill City Home Buyers have the tips, skills, and resources to give you peace of mind. Contact us today.