Losing the home of your dreams can hit you really, really hard. Especially when you have spent several years building up memories in your very own home. But let’s face it; foreclosures are a reality in this age of economic downturn and the sooner you accept it the faster you can sort out the financial mess that you are embroiled in. But unfortunately, most people don’t do that. They prefer not to think of this situation and rush to call a realtor only at the last minute. If you are doing this, you are most probably missing out on a chance to save your home or get a good deal on the sales of your home.

First, it is better to understand the reason for your inability to pay up the mortgage for a month or a few months. You may have been laid off or your working hours may have been cut short because of the recession. Figure out if this trend is reversible; if you will be able to supplement your income with an additional job or some help from a generous family member. If that’s not an option, you can analyze to see if this is just a temporary setback that can be compensated in a few months or if this financial strain may be more permanent in nature.

If this mortgage crisis is a temporary phase, you may just be able to save your home from foreclosure. Remember, the last thing that the bank wants to do is to take back your home. When you do contact your bank, talk to somebody in the loss mitigation department and try to convince them that this is a temporary glitch and work it out with the bank. If your problem is temporary, you may be offered these solutions from your bank:
• Reinstatement: You may be able to pay off the total amount owed to the lender in a lump sum by a specific date. Forbearance may accompany this option.
• Forbearance: Your bank may reduce or suspend your mortgage amount for sometime and then agree to another option to bring your loan current. This option is combined with a reinstatement when you have to bring the account current at a specific time.
• Repayment plan: The lender allows you to resume making your regular monthly payments, plus a portion of the past due payments each month until you are caught up at a future date.
If you will not be able to pay up your mortgage for a long-term, your lender may give you the following options:
• Partial Claim: In case your mortgage is FHA insured, your bank could help you get a one-time interest-free loan from your mortgage guarantor to bring your account current. You may pay this loan back at a later date. You must also sign a promissory note which is interest-free. A lien will be placed on your property till you pay the promissory note in full.
• Mortgage modification: The bank may agree to change the terms of your original loan to make payments affordable. This is if you can make payments but can’t afford enough to make your loan current. The bank may do this by adding some missed payments to the existing loan balance or by changing the interest rate or by extending the term of the loan by a few years.
If situation is worst and you are forced to sell your house, you may make the most of it by discussing these issues with your bank:
• Sale: Your lender will set a time limit before which you must sell that house and pay up the amount owed to the bank. You must use a realtor who can sell your home for a good price.
• Assumption: A buyer may be allowed to take over your loan and have ownership of the home.
• Short sale: If you are unable to sell the property for the full loan amount, the bank may accept less that it is owed. This is only if your loan is at least 2 months delinquent, you are able to sell the house within 5 months and if the value of your home meets HUD program guidelines.
• Deed-in-lieu of foreclosure: You may give back your property to the bank and be debt-free and get a better credit rating. But if you choose this option, you most probably must sell your home for its market rate 90 days before the bank agrees to this option. You may avail this option if you have creditor judgments, second mortgages, and IRS or state tax liens. Also, don’t forget to get in touch with an aggressive realtor if you decide to sell your home.