If you are in danger of facing foreclosure because you have missed your monthly mortgage payments, you need to act quickly before it is too late to negotiate a loan modification and your home is sold at foreclosure auction. You may feel desperate now, but there is still hope until the auction date arrives. Here are some tips to help save your home from foreclosure.
- During foreclosure proceedings, do not move out of your home so that you can still claim benefits such as one-time FHA mortgage insurance, etc.
- Mark your mortgage due 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 slip down the list as you catch up on your mortgage payments. Aside from hurting your credit score, these debts won’t carry any major consequences compared to losing your home to foreclosure. The effects of foreclosure on your credit score are MUCH more severe anyway.
- Do not ignore or wait for the foreclosure notice from your bank. Let them know in advance that you are in a financial crisis due to a hardship. This act of good faith could earn you a little mercy from your lender. Provide the necessary loan modification documents for your evaluation. In all likelihood, your lender could 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 financial and foreclosure 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 notes or loans, contact your bank directly.
- Consider options for affordable mortgage payments. It could be restructuring or refinancing your mortgage loan. With the new Obama loan modification programs now available, deciding which to choose would be easy depending on your financial ability. 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, it sells 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 will not be enough in the long run if your financial situation remains 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 a full settlement of the debt. Usually, however, the home’s sale value can’t cover the outstanding loan balance, so some banks would rob you for 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 back your property 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. In the case of forbearance, your lender will temporarily stop foreclosure proceedings until another payment option can be executed.
- Declare bankruptcy. This could put your credit history in a bad position. Remember that you may or may not keep your home with this option. If you seriously believe this is your only way out, call your attorney to discuss what to do.
- Give 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 homeless. Since you are making things easier for the lender, this act can be recognized by the elimination of your loan balance, even if the house sells less. Again, get the help of a mortgage attorney.
Be realistic when choosing your options because once an agreement is reached you must comply, 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 in person in an open and honest manner. Doing so will save you from paying attorneys or credit counseling agencies.