If you are in danger of foreclosure because you have missed your monthly mortgage payments, you must act quickly before it is too late to negotiate a loan modification and your home is sold at a foreclosure auction. You may be feeling hopeless now, but there is still hope until the auction date rolls around. Here are some tips to help save your home from foreclosure.
- During foreclosure proceedings, stay in your home so you can still claim benefits like one-time FHA mortgage insurance, etc.
- Mark your mortgage expiration date in red and prioritize your most important financial obligations accordingly.
- Make a list of all your monthly payments. Your monthly mortgage payment should be at the top of the list. Credit card bills, personal loans and other unsecured debt will have to suffer and go down the lists while you catch up on your mortgage payments. Aside from hurting your credit score, these debts won’t have much of a consequence compared to losing your home to foreclosure. The effects that foreclosure has on your credit score are MUCH more severe anyway.
- Don’t ignore or wait for your bank’s notice of foreclosure. Let them know ahead of time that you are in a financial crisis due to a hardship. This act of good faith might earn you some mercy from your lender. Provide the necessary loan modification documents for evaluation. In all likelihood, your lender may be able to extend the grace period or consider a forbearance agreement as long as you make an effort to catch up on your mortgage payments.
- Seek help from the credit counseling and debt management program. You can repair your own credit by downloading our free credit repair kit. Take advantage of lenders and local housing agencies or extension services that offer these programs, especially if it’s free. The best place to look for free foreclosure and financial help is the US Department of Housing and Urban Development (HUD), as there are lists of credit counseling and debt management agencies approved to work with HUD loans and possibly with your lender. In cases involving predatory IOUs or loans, contact your bank directly.
- Consider options for affordable mortgage payments. It could be restructuring or refinancing your home loan. With the new Obama loan modification programs now available, deciding what to choose would be easy depending on your financial standing. Keep in mind that mortgage refinancing costs can be high due to processing fees such as closing costs and points.
- If you are successful in negotiating a lower monthly mortgage payment, get the resolution in writing. In fact, save all loan modification documents that legally represent any agreement or arrangement with your lender.
- If not, sell unnecessary assets. You can raise money by doing this and pay off your mortgage until you recover from your financial difficulties. It is also a good time to reduce your monthly expenses. But doing both won’t be enough in the long run if your financial situation stays the same.
- You can sell your house to a third party as an alternative. This could be called a short sale. Sometimes creditors accept this as full debt settlement. Usually, however, the sale value of the home cannot cover the outstanding balance of the loan, so some banks will rob you for a foreclosure deficiency if you have too many assets. Get help from a housing counselor, real estate agent, or loan modification attorney. You can also buy your property back after the foreclosure auction.
- Negotiate a leniency agreement. As long as you want to keep your home, that’s as long as lenders want to be paid back. In the case of forbearance, your lender will temporarily halt foreclosure proceedings until another payment option can be executed.
- Declare bankruptcy. This could put your credit history in a bad light. Remember that you may or may not keep your home with this option. If you seriously believe that this is your only way out, call your lawyer to discuss what to do.
- Turn your house over to your lender. This is called a “deed in lieu of foreclosure.” This option will not affect your credit score, but you will be left homeless. Because you’re making things easier for the lender, this act can be recognized by wiping off your loan balance, even if the home sells less. Once again, get the help of a mortgage attorney.
Be realistic when choosing your options because once an agreement is reached you must stick to it, otherwise you will surely face another foreclosure.
Most mortgages are guaranteed or financed by government programs like HUD, FHA, or VA. If your mortgage belongs to one of these agencies, ask what options they offer to save your home. But first you must approach your lender to negotiate openly and honestly in person. By doing so, you will save paying lawyers or credit counseling agencies.