Many ways exist to rescue your home from foreclosure. The Federal Trade Commission recommends that you try to get a loan modification or try to sell your home through a short sale or a deed in lieu of foreclosure. A loan modification changes the terms of your mortgage so you can afford to make the payments. A short sale occurs when you sell the home for less than what you owe. A deed in lieu means you transfer your title to the lender to cancel your debt. If none of those options are available or appeal to you, you might be able to stop a foreclosure by getting renters.
Before you make plans to rent your house, check to see whether you still have time to do so. If you missed even one mortgage payment, contact your lender to explain your situation and to determine the status of your mortgage. When you don’t pay your mortgage, some lenders schedule a public foreclosure auction in one month; some wait a year. This often depends on the state in which you live. If a sale has been scheduled, ask the lender how much time you have to stop it. If you missed the deadline to rescue your home, you cannot sign a lease agreement with a tenant.
Rent Out Your House
If your house is in good repair, is in a safe neighborhood and has a cheap mortgage, you're in a good position to rent it out, said Marilyn Lewis of MSN Real Estate. The more you deviate from those standards, the more difficult it will be to achieve your goal of stopping a foreclosure through renters. Figure how much it'll cost you to stop the foreclosure. Include the mortgage payments, utilities, landscaping costs and general maintenance. Unless you have a free place to stay, you also need to figure what you would pay for rent. Then, find out what rent is going for in a similar dwelling in your area. If people are paying the amount you need to take in each month or more, consider renting. Otherwise, renting your house might not be the answer.
If you have a Federal Housing Administration loan, you can rent out your house but with one restriction: You need to have lived in the house for one year before you can rent it out. The reason for this restriction is to prevent investors from getting low-interest loans since the intention of the program is to help folks buy a home for themselves.
Consider renting out a room or the basement in your house to help you come up with mortgage payments. Determine whether you need a permit. You typically don’t need one if you are renting a room and sharing your home, but you might if you rent the basement as a separate living area. Run a credit check and criminal background check on any prospective boarders.
You Become the Renter
Some lenders might let you remain in your home by becoming the renter yourself in a mortgage-to-lease or a deed-for-lease program. You would deed your house to your lender in exchange for a multiyear lease either at or below market rent. However, when your lease is up, you might not be given the opportunity to buy back the house.
- Federal Trade Commission: Mortgage Payments Sending You Reeling? Here’s What to Do
- MSN Real Estate: How to Rent Out Your House
- Financial Web: Can You Rent an FHA Home?
- Bankrate.com: How to Rent Out a Room to a Boarder
- The Washington Post: Bank of America Hopes Underwater Homeowners Become Renters to Avoid Foreclosure
- CNNMoney: Avoid Foreclosure -- Rent Your Own Home
- RealtyTrac: Know Your Options to Stop Foreclosure
Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.