Losing a home is something that affects many of us, disrupting our lives and tearing our families apart. With an increase of more than 200% in recent years and no signs of decline, now is the time to ensure that you do not become part of the statistics. What can you do to prevent foreclosure? You will need to make decisions and focus on your desired outcome.
Temporary Delay in Payments
Do not delay in communicating with your lender. It is very important to contact your lender as soon as begin having difficulties that may lead to foreclosure. Lenders are interested in working with you so you can stay in your home; they are not interested in selling your home. Work out a temporary delay in payments as you work at finding a way to keep your home. Be focused and diligent in working with your lender towards a solution. Be prepared to answer questions honestly about your finances.
Legal Advice
Speak to a trusted attorney. Stay away from « quick fix » attorneys. They may not give you the best advice as many times homeowners will be pushed to file for bankruptcy prematurely or unnecessarily. Facing a foreclosure can be very emotionally taxing and you need professional help. A legal representative’s advice may bring solution you haven’t considered as possibilities. Don’t wait until foreclosure is imminent. Get legal advice when you first become worried about making your mortgage payments.
Renegotiation
Lenders want you to be able to your mortgage and keep your house. They’re in the lending business, not in the repossessing business. Talk to your lender about renegotiating the terms of your mortgage. This is not a short term fix. This is a long term solution, with both lender and homeowner getting what they want. Lenders need to see a profit to stay in business so get all the details about fees and penalties, which may be rolled into the mortgage.
Refinance your Debt
Debt counseling with your lender can help you see how all your outstanding debt can best be handled. If you home was financed at a high interest rate, you can reduce your monthly payments by refinancing at a lower interest rate. A word of caution: be wary of fraudulent refinancing schemes. If you are having difficulty with your mortgage payments, chances are you’re having trouble with some of your other debt. Debt consolidation may be an option for you.
Loan Modification
A loan modification, a change in the terms of a loan without the need for complete refinancing, is considered the best way for homeowners to avoid foreclosure and remain in their homes. The subprime mortgage industry has given new life to loan modifications. The primary reason for foreclosure is the adjustable interest rate. With a loan modification you are able to go to a fixed interest rate, helping you adjust your current payment and allowing you to stay in your home. You have the ability to lengthen your loan payment so you will have a lower payment, making it easier to pay your bills.
Short Sale
A short sale is when a lender is willing to accept a discount on a mortgage to sell the home and avoid foreclosure. In the event that you are unable to keep the house, selling it yourself is preferable to repossession by the lender. If your home does not have enough equity the lender may agree to accept less than what is owed against it, resulting in a short sale. Get professional advice, such as a lawyer or real estate agent. They can be a tremendous help when negotiating with the lender.
Sell your Home
Selling your home may not be the option you want to exercise but if you can sell it and pay off your mortgage you will avoid foreclosure, providing you sell before the foreclosure date. Contacting a real estate agent familiar with foreclosure investing is the best route to take, in this situation, to sell your home.
Deed in Lieu of Foreclosure
You may have the option of signing the home over to the lender in exchange for having the lender canceling the loan. The lender agrees not to initiate foreclosure proceedings and to terminate any that are existing. Be sure the lender forgives the amount of loan not covered by the sale. You will probably be required to list your home for a short period of time before the lender will accept a deed in lieu of foreclosure.
File for Bankruptcy
Filing for bankruptcy can stop the foreclosure process and give you time to work out a plan to keep your home. Get professional advice – this is no time for trial and error. Keep in mind the process may still continue and your credit rating will suffer for 7 years.
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