When paying mortgage becomes a problem and you start missing making timely payments, your lender is likely to contact you and will probably use foreclosure as a legal method to repossess your home. If your property’s’ worth is less than what you own, then a deficiency judgment will be pursued. Both will have a negative impact on your future credit status hence they should be avoided as much as possible.
I recommend you take advantage of our free consultation with one of our trusted real estate attorneys, but here are some tips that might help you avoid foreclosure and the stress accompanying it.
Do not ignore the problem since the more you lag behind, the harder it will become to reinstate your loan and it will increase the chances of losing your home.
Do not ignore your lender. Immediately you realize you will not be able to make your mortgage payment on time, contact your lender’s loss mitigation department by calling or writing. Explain to them your current situation and be ready to provide them with your financial information such as your income, expenses, tax returns, loan documents and any other relevant information that they might use to help you.
Do not leave your home. If you do so you might lose your eligibility for help.
Know and understand your mortgage rights. By reading your loan documents you will get to understand the options that your lender has in case of default. Understand the foreclosure laws and the timeframes involved in your state. In every state these laws are different hence the need to contact your State Government Housing Office.
Find out and understand the foreclosure prevention options available. There are several options available depending on your situation.
- You can ask for a reinstatement where you ask the lender for total amount owed to date then pays off. This option does not require the lender’s approval.
- Forbearance or repayment plan option will involve the homeowner negotiating with the lender to be allowed to make payments over a specific time period. The payments will involve making the present mortgage payment and a part of the back payments.
- Mortgage loan modification option which might involves a reduction of the loan’s interest rate, the principal balance, the loan term or a combination of the three. This helps in lowering the payment and will require full documentation.
- If your mortgage is low enough to be paid by market rent, you can convert it into a rental and pay the mortgage.
- You can file for a deed in lieu of foreclosure by giving back the property to the lender. It has several disadvantages.
- You can declare bankruptcy and stop foreclosure. This is applicable only in some situations and some states. This is a costly option in terms of credit scores though.
- If you have a good credit score and enough equity in your property, you can refinance your mortgage to stop foreclosure.
- If you are a member of the military, you may qualify for relief within the service members’ civil relief act. it lowers mortgage payment as well as consumer debt.
- There is also the option of selling the property to stop foreclosure. This requires you to have adequate equity in the property though. It helps the homeowner to get back some of their equity.
- A short sale is also a viable option especially if the mortgage debt exceeds the property’s current worth. This requires proof of financial hardship.
Contact Housing and Urban Development approved housing counselors to help you understand the law and the options available. They will also help you to organize your finances as well as represent you in the negotiations with your lender. Try and avoid foreclosure prevention companies as much as possible as they will charge you for the service. Also avoid foreclosure recovery scams that may require appointing firms to act on your behalf.