Posted by Emmanuel Ajala ● Aug 24, 2020 9:00:00 AM

Ways to Avoid Foreclosure


Pre-foreclosure is the first stage of the foreclosure process. When a property is in pre-foreclosure, it means that the homeowner is between three to six months behind in mortgage payment. The process begins when the lender filed a notice of default or “lis pendens,” which is usually between three to ten months.

One thing you should understand is that a property in the pre-foreclosure stage can still be reversed and prevented from going into the foreclosure stage. Let’s discuss some of the ways to avoid the foreclosure stage and reduce its effect on your credit score.

Pay Off Your Delinquencies

The best way to get out of pre-foreclosure is to make a one-time lump sum payment of the past months. This process is also called ‘reinstatement.’ With a one-time transaction, you can prevent your loan from further going into delinquency, and by this, you can stop it from negatively impacting your credit score. So if you are capable of paying off your missed payments, you should do so as soon as possible. 

However, if you are going through a hard time or experiencing financial difficulty, this option is unlikely to be the best for you. So here are other options that may better suit you.

Mortgage Modification

If you are having a hard time paying your mortgage, mortgage modification can be a better option. It’s like a mortgage refinance, but instead of getting a brand new loan, a mortgage modification modifies the existing loan. So no cashing out on home equity, no locking-in on the current rate, and the lender makes the decision. 

They rewrite your loan by changing some terms of your mortgage (like extending your loan term, reducing the interest rate, or forgiving part of your debt). This process helps lower your payment to the point that you can afford your monthly mortgage fees.

Short Sale

A short sale is the process of selling your home during pre-foreclosure. This process is another way of getting out of the loan when you think you cannot afford to pay off the mortgage. Unlike the home selling process, a short sale is when you cannot sell the property for more than what you owe on the property. When you’re short selling, the lender is in control of the process; therefore, you need their approval. 


Deed in Lieu of Foreclosure

Deed in lieu of foreclosure is the method in which the borrower transmits all interest in the property to the lender to avoid foreclosure proceedings. It is considered the last resort to avoid foreclosure, and it’s the process of intentionally surrendering your property to the lender to be relieved of your debt. The difference between deed in lieu and foreclosure is that deed in lieu is intentional, so the damage to your credit score is usually minimal. The advantage of the deed in lieu to the lender is that it prevents them from spending more on foreclosing the property.

If you are having a hard time paying your mortgage, remember that there are different ways to fix this. All you have to do is contact your loan servicer and work out a plan together. And remember that the earlier you ask for help, the lesser the effect on your credit score!




Emmanuel is an enthusiastic freelance writer with expertise in real estate, mortgages, business and SaaS. His passion for real estate and property investing inspired him to create content that breaks down industry jargon and connect the dots between emerging technologies and property investing. When not writing, he is either taking a nap or working out. Contact him on

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