Foreclosure Redemption and Credit Report

M

Michael

Member
I’m currently in the six-month redemption period following a foreclosure, and the only way I can reclaim my house is by paying the amount it sold for at the sheriff’s sale. What I’m unsure about is whether that redemption amount has to be paid fully in cash, or if it’s possible to take out another loan to cover it.

Has anyone gone through this process or knows how it typically works?
 
I went through something similar in Michigan a couple of years ago. The redemption period allowed me to repurchase, but the kicker was that it had to be paid in full, not piecemealed. Most lenders will not touch you during redemption because the foreclosure is already on your record. I ended up having to borrow from family since banks shut the door.
 
Yeah, unfortunately, it usually has to be cash upfront. A new loan is technically possible, but it is insanely hard to get approved while you’re literally mid-foreclosure. Most traditional lenders treat it as radioactive. Some private/hard money lenders might step in, but the rates are brutal.
 
Adding to this ..... redemption laws vary by state. Some places allow you to finance it if you can find a willing lender, but practically speaking, your credit report showing foreclosure makes banks say nope. You’d have better luck with a cash buyer or investor partner.
 
I work in title/escrow. Every redemption I’ve seen was either cash or cashier’s check. I’ve never seen someone successfully fund it with a brand-new mortgage, because underwriting standards won’t allow it. Redemption is kind of designed to be an all or nothing payback.
 
you’re probably not going to qualify for another loan right now. Lenders check your report, and the foreclosure is already there, even though you’re in the redemption window. I’d say your only hope is a private investor or family loan.
 
Not legal advice but check your state statutes. In some places like Minnesota, the law explicitly says cash. In others, it just says redemption payment. But like others said, banks do not want to issue loans in this exact situation.
 
Friend of mine tried this exact thing. His plan was to get a personal loan from a credit union to cover the redemption. They flat-out denied him after seeing the foreclosure. Ended up losing the house. Sucked.
 
Honestly, even if you could finance it, you’d probably be paying such high interest rates that it would cripple you again. Might not be worth it unless this house is super sentimental or you have a huge equity gap to protect.
 
I don’t mean to be pessimistic, but the redemption laws were written in an era where people had family farms and someone rich uncle would come bail them out. Modern lending markets don’t play ball with that kind of timeline.
 
talk to a real estate attorney who specializes in foreclosure defense. They sometimes have connections with niche lenders who do “foreclosure bailout loans.” They’re not pretty, but it could be an option.
 
Yeah, those foreclosure bailout loans exist but holy hell are they predatory. I saw one at 12% interest + $20k in fees. The guy kept the house but ended up defaulting 2 years later because the payments were insane.
 
This is one of those things where state matters. Where are you located? For example, in Illinois, the redemption is strict and has to be lump sum. But in California, redemption rights are extremely limited and vary by case.
 
Even if you can pay, the foreclosure will still show up on your credit report. Redemption doesn’t erase it. It just gives you the house back. That part sometimes confuses people.
 
I don’t know much about redemption, but I’m wondering… what’s the upside of fighting for the house? If it’s underwater or a financial sinkhole, maybe walking away is better long term.
 
That’s a fair question. But sometimes, people have equity locked up. Like if the house was worth $200k but sold for $120k at auction, redeeming it for $120k means you just bought back $80k in equity. That’s why it’s tempting.
 
Hard money is a double-edged sword. It can save your house… but it can also trap you in a loan you can’t refinance out of because your credit is torched. Proceed carefully.
 
I’m lowkey amazed redemption is still a thing. Feels like an old western law where the sheriff nails a notice on your door and you have X days to show up with a bag of gold coins.
 
This. Foreclosure is already one of the hardest financial hits you can take. Trying to redeem on top of that is like asking a marathon runner to sprint another 10 miles after collapsing. Be gentle with yourself.
 
Yeah… redemption’s technically a right, but realistically it’s brutal. You need cash now while your credit is wrecked and most banks won’t even touch you. It’s a trap for a lot of people.
 
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