Some problems have a snowball effect. Maybe you lost your job and, even if you were only unemployed for a short time. Now you are having trouble paying your bills. Your mortgage is the biggest concern because you have a lot riding on it. You’re home, for one, and your credit score as well. You need to understand foreclosure in California and what happens to your credit score so that you can avoid as much damage as possible. There are multiple steps involved in foreclosing on a property and you have ways of protecting yourself as they take place. You’ll need to act fast, though, because your options become more difficult and less effective as the foreclosure process goes on. In the end, selling your house quickly may prove to be the best way for you to sidestep foreclosure altogether and preserve your credit standing.
The Beginning of the California Foreclosure Process
You are facing a gradual process that can take several months. But don’t spend that time just wondering what to do if your house is being foreclosed on—act. The sooner you bite the bullet and start talking to your lender about the situation. The better your chances will be of saving your credit score. You should contact your lender as soon as you see that you will have trouble making a mortgage payment. They may be amenable to one of two options before the situation spirals into a full-blown crisis for your credit reputation:
- Forbearance. You can request a forbearance. Which is a temporary reduction or suspension of mortgage payments while you get back on your feet financially. Your lender may grant you a forbearance without informing the credit reporting agencies. But it depends on their policies. Even if your lender does report your forbearance status, their reporting will still have a less negative impact on your credit score than late payments would. Be sure to ask about the lender’s reporting procedures to understand the potential impact on your credit.
- Loan Modification. Depending on your lender’s policies, you may have a second option of modifying the terms of your loan so that the payments are more manageable. Some lenders won’t consider a loan modification until you are behind a few payments. In that case, your credit score will already have suffered. But, if you act early, loan modification does not have to show up on your credit report at all since your credit record does not include the conditions or terms of your mortgage. Your lender may choose to report it as a debt settlement, however. Once again—talk to your lender and find out what they intend to do. The consequences could leave you with a difficult choice to make.
You may be weighing which way to go—forbearance and a potential black mark on your credit record. Or maybe even a debt settlement on your record in exchange for a loan modification. If these trade-offs don’t appeal to you, or if you won’t be able to keep up with your mortgage even with these options, consider selling your home before you get deeper into the foreclosure process.
The Final Steps Toward Foreclosure in California
If you get even further behind in your mortgage payments, you will receive letters and phone calls reminding you of that uncomfortable fact. When your lender decides to actually foreclose, they are required by California law to contact you to try to establish a recovery plan. If you don’t respond promptly, you will receive another letter, called demand or breach letter. That will be the lender’s official warning of their intent to file a mortgage default notice in 30 days.
You might feel in over your head at this point. Since the default notice is public record, it is likely to show up in your credit report. Besides lowering your score, a default notice may also make it harder to refinance your mortgage or get a new one at a later time. Luckily, once you are officially in default. There are new ways you can avoid foreclosure in California.
- Deed-in-lieu. At this late stage of the game, one option is a deed-in-lieu of foreclosure. This means that you give the lender possession of your house right away. Instead of going through the remaining steps to foreclosure. You will save money on fees if the lender accepts a deed-in-lieu. And a lot of stressful back and forth hassle with the bank. However, it is just as devastating to your credit score as a foreclosure itself.
- Short Sale. In a short sale, your lender agrees to accept the proceeds from the sale of your house to settle your mortgage. Even if the sale amount does not cover the full debt. If the lender does approve a short sale, they may inform the credit reporting agency that you are “paid in full.” However, you will have to find a buyer for your home and the lender has to agree to the deal. This may not be easy since you will need a buyer who is willing to commit to the deal and is able to find financing for it. All while facing the risk that the lender will say no to the anyway. Needless to say, it’s not a very appealing opportunity for most homebuyers.
Selling your house is often the best choice when facing foreclosure. But finding the right buyer in the traditional market is a lot of work. It means hiring a real estate agent and paying their high California commission rates, doing major repairs on the home, staging everything to look picture-perfect, evacuating for unexpected showings, and hoping for the best—all within the timeline of the foreclosure process. The entire effort could amount to nothing if you don’t find the right buyer in time. Luckily, there is an easier way to sell your house fast.
Sell Your California Foreclosure House Fast
Instead of complicating your life even more by trying to find a buyer that has financing and tolerance for risk. You can sell to Osborne Homes in a few quick and easy steps. As a local home buyer, we are accustomed to buying California foreclosure homes. And we understand what you are going through. We can help make this experience easier by usually making you an offer on your house, often within 48 hours after you call us. And there’s no need to even fix your house because we always buy homes as-is. We make every possible effort to get your money to you fast. And it is often within a week after you accept our offer or get bank approval for the sale.