Possibly the most overlooked way to stop foreclosure is for a friend or family member to purchase the property that is being foreclosed and allow the original homeowners to remain living there, and this is a much better option than the tried-and-true "beg, borrow, or steal" alternative.
In essence, this can follow the same process as using a private investor to save the home, but it is usually easier for foreclosure victims to trust their friends or family before they trust a real estate investor.
Especially with the possibility of running into a foreclosure scam, using someone well-known presents a more secure option.
There are a number of considerations before attempting this method of stopping the foreclosure process, all of which homeowners and potential buyers need to be aware of.
The first problem that any buyer will have to confront is if the family member that is purchasing the house out of foreclosure has the same last name as the foreclosure victims themselves.
Lenders will often refuse to make a loan in this situation, as it is not a third-party, arms-length transaction.
The parties are related and there is a pending foreclosure, so the purchase resembles a family bailout that is attempting to use a new mortgage to take care of a family member, rather than a buyer and seller getting together to complete a real estate transaction.
Mortgage companies would like to avoid getting into the middle of homeowners' intra-family affairs, especially if there is a recent history of financial problems.
So foreclosure victims will have to locate a family member who has a different last name or use a friend, if they wish to pursue this method of avoiding foreclosure.
Secondly, if the friend of family member does not have a down payment or excellent credit, it will be very difficult to qualify for the loan to purchase the house out of foreclosure.
Currently, the real estate market provides some great deals, because all of the foreclosures have depressed home values in certain areas.
This makes many homes much less expensive.
In fact, some areas of the country are experiencing decreases of over 50% year-to-year, while values are stagnant or slightly declining across the board.
The foreclosure victims may find that they owe much more than their home is currently worth, and the possibility for a short sale may present itself, if the lender is willing to work out a solution.
However, despite the fact that the market is currently favoring buyers due to the lowering of prices, this is also a difficult time for home buyers who need to borrow money to finance their purchase.
Many lenders have gone out of business now, while others are following more strict lending guidelines and loaning far less than even six months ago.
Qualifying for a mortgage with no money down and less than excellent credit is simply no longer an option.
If the foreclosure victims and friend or family member have a savings fund or can liquidate other assets to save the house from foreclosure, though, they will have a significantly better chance of getting a loan with a competitive interest rate.
If this option is open for homeowners facing foreclosure, and they are able to find a compassionate family member or friend who can help them stop foreclosure, it is wise for all parties involved to put together an insurance plan to prevent foreclosure from happening again.
Just a few lessons that homeowners can take include saving up an emergency fund to pay the mortgage in the event of a financial hardship, not refinancing the property every few years and treating the house as an ATM, and considering the house as a place to live rather than another bank account.
In the event of a future financial crisis, it is also vitally important to contact the mortgage company as soon as the problem begins and inform them of any late payments.
Also important is gaining as much knowledge and foreclosure advice as possible from the current situation, so that it will be much easier to respond quickly if problems come up again.
There are a number of important benefits that using a friend or family member as a real estate investor can give the foreclosure victims.
These include the possibility of keeping the house, finding a trusted source to help out in a financial hardship, and not having to pay real estate commissions.
The problems that homeowners have in this situation, such as finding someone with a different last name to help out, and getting the home buyer qualified for the new mortgage, may be difficult to overcome, but the rewards are being able to stop foreclosure through a secure solution with fewer worries of being taken advantage of.
Homeowners in foreclosure need as many options as possible to keep their homes, and this can provide one of the most mutually beneficial solutions, and is in keeping with the local solutions we have recommended in previous articles.