Hopefully you’re never in a situation where you need to work with a foreclosure bailout lender. But we all know things come up and circumstances beyond our control can lead us to where we don’t want to be.
A foreclosure bailout loan is a mortgage loan that is created to prevent homeowners from their bank foreclosing on their property. It’s a type of refinance loan, with the homeowner taking out a new mortgage to apply to the previous loan that is in default.
This can be a lifesaver to desperate homeowners who have tried everything they can think of to stave off the possibility of losing their home. Considering a foreclosure bailout loan is a stressful time. You have a lot to think about but you need to make sure to consider all factors and try not to rush to a decision.
Foreclosure bailout loans will be based on both the value of your home and the money owed. An appraisal will be required by the lender to set value for the collateral. Failure to keep current with your loan could return you to your original unfortunate circumstance.
How Do They Work?
It’s a simple process. Essentially you’re selling the property to the lender and then leasing it back. This will last for a short time, such as 18 – 24 months. You likely have a high interest rate. You will need to work to improve your credit. After a year of making payments a borrower can often refinance with a new mortgage and better interest rate.
The terms and conditions of the loan will be determined based of the amount equity had in the property and marketability and value as well as the borrower’s current financial status. Thus, if you still owe a lot of money on your home, or have a very low credit score, you may not be able to get a bailout loan.
At minimum it is usually required to have 25% of the worth of the home existing in equity. Meaning if your property is worth $100,000 you’ll only get a loan for $75,000 and should have the additional paid down.
Who Would Apply for a Foreclosure Bailout Loan and Why?
The most obvious reason to apply for a foreclosure bailout loan is that you’re facing foreclosure. Here are a few things involved with that which might make you want to research getting a foreclosure bailout loan.
- You’re 3 or more payments behind on your mortgage.
- You have money to pay your monthly mortgage but not to payback what you’re late on.
- You’ve attempted to access funds from other sources without success.
- Your credit score is low, and getting lower.
- Your credit cards are maxed out, or close to it.
- You are running out of time to save your home.
Time is so important when it comes to a potential foreclosure. The longer you wait the more at risk you are! In order to qualify with most foreclosure bailout lenders you need a credit score of 500 or more. The longer you don’t make qualifying payments on your mortgage the further down your score will go.
In the same vein, the longer you wait the more you owe. It will affect the size of the loan you are able to attain as well as the interest rate and terms you’ll be given. The sooner you start the process of getting your foreclosure bailout loan the better. It can help you get back on top of what seemed like an impossible situation.
If you’re in some of the above mentioned situations and considering a foreclose bailout loan, there’s a few things to keep in mind. The reason the lender was willing to loan you the money is that they have your property for collateral. This means that if you do not make your scheduled payments, they can sell your property and keep the money.
Foreclosure bailout lenders have a low risk due to this. You don’t. You should not be looking into such a loan if you aren’t confident you can make the payments. You will just get yourself into a worse financial situation that will be even harder to get out of.
How Do You Apply for One?
Before you decide to apply make sure you have researched foreclosure bailout lenders. There are a lot of quality lenders that want to help you and not take your property. However, due to the desperate nature of the situation which sometimes causes people to make un-thought out decisions, there are predatory lenders as well.
Make sure you are working with a professional and getting the best deal you can. Get a quote from more than one possible lender. This doesn’t mean you drag your feet, time is still of the essence. But you don’t need to make a rash and uninformed decision.
Make sure to have all the necessary paperwork ready. This includes, but is not limited to: all paperwork from your financial institution regarding your foreclosure, pay stubs, a two year history of tax returns, any appraisals you’ve had done on the property. The lender will like have another appraisal done, but the more prepared you are the better.
Once you’ve completed the application process and been approved it will take effect almost immediately. Foreclosure bailout loans are designed to help out quickly.