If you are in danger of facing foreclosure because you have defaulted on 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 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 in order to 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 go through the lists in the meantime as you catch up on your mortgage payments. In addition to damaging your credit score, these debts will have no major consequences compared to losing your home to foreclosure. The effects of foreclosure on your credit score are MUCH more severe anyway.
- Don’t ignore or wait for your bank’s foreclosure notice. Inform them ahead of time that you are in financial crisis because of a hardship. This act of good faith could generate some mercy from your lender. Provide the necessary supporting documents for the loan modification for evaluation. In all likelihood, your lender could extend the grace period or consider a forbearance agreement as long as you make the 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 these programs offer, especially if it is free. The best place to look for free foreclosure and financial help is the U.S. 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 your lender. In cases involving predatory promissory notes 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 available today, deciding what to choose would be easy based on your financial ability. Be aware that mortgage refinance costs can be expensive due to processing fees, such as closing costs and points.
- If you can negotiate a lower monthly mortgage payment, get the resolution in writing. In fact, keep 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 will not be enough in the long run if your financial situation remains the same.
- You can sell your home to a third party as an alternative. This could be called a short sale. Sometimes creditors accept this as a total debt settlement. However, the sale value of the home typically cannot cover the outstanding loan balance, so some banks will rob you for poor foreclosure if you have too many assets. Get the help of a housing counselor, real estate agent, or loan modification attorney. You can also buy your property back after the foreclosure auction.
- Negotiate a forbearance agreement. As much as you want to keep your home, it is as much as the lenders want to get paid. In the case of forbearance, your lender will temporarily halt the foreclosure proceedings until another payment option can be enforced.
- Declare bankruptcy. This could put your credit history in a bad position. Remember that you may or may not be able to keep your home with this option. If you seriously think this is your only way out, call your attorney to discuss what to do.
- Turn your home 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. As you make things easier for the lender, this act can be recognized simply by eliminating your loan balance, even if the home 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 such as 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 personally openly and honestly. By doing so, you will save paying for credit counseling agencies or attorneys.