Ways to Stop a Foreclosure

Once you’ve missed two or more mortgage payments, your loan is considered in default, and your lender can then start the foreclosure process. The length of time it takes to foreclosure on your house depends on what state you live in, and whether your state allows judicial and non-judicial foreclosures. It is very important to know the difference. Up until the day your house is put on auction, there are things you can to do try to stop the foreclosure.

Instructions

1. Get a refinance loan. You can get a new loan to replace your existing loan, and get lower monthly payments or a lower interest rate in the process, sometimes both. Depending on the amount of equity you have in your home, you can consolidate other dates into your refinance loan. This will also help to decrease your monthly expenses. In order to be approved for a refinance loan, you’ll need to have your house appraised and you’ll need to be able to personally qualify for the loan.

2. Negotiate a loan modification with your lender. A loan modification changes one or more key elements of your loan, creating a new contract between you and the lender. The terms of the loan most often modified are the interest rate, the length of the loan or the type of loan. For example, you can have an 15-year adjustable-rate loan converted into a 30-year fixed-rate loan. Loan modification, however, is dependent on the lender’s compliance.

3. 

   Sell the house. You can try to sell your house, pay off the mortgage loan and then find a more affordable place to live. If you are in a situation where you owe more than the fair market value of the home, you may qualify for a short sale. In a short sale, the lender agrees to accept a bid placed on the house, which is less than you owe on the mortgage. In this situation, you’ll avoid foreclosure, but you’ll have to move and you won’t make any money from the sale of your house.

4. Pursue a deed-in-lieu of foreclosure. A deed-in-lieu of foreclosure is when the lender is in a situation where they will lose more money foreclosing on you than they can regain reselling your home. When this happens, they may be willing to accept a deed-in-lieu of foreclosure. You’ll essentially just give the house to your lender. You’ll have to move out of your house, and you’ll lose all claim to it, but you’ll have stopped the foreclosure from ruining your credit.

5. 

   Contact the Federal Housing Administration (FHA) to speak to a financial counselor. They can help you to find resources within your state or region, which provides financial relief or assistance to struggling homeowners. Many states have started their own low-interest loan programs to help stop foreclosures.

Tips & Warnings

• Act quickly. The longer you wait to stop a foreclosure, the fewer options you’ll have. As soon as you realize you are going to fall behind on payments you should contact your lender.

• Don’t pay an independent loss mitigation specialist. Your lender will have a loss mitigation department, and you can receive free or low cost counseling through HUD.

Resources

• HUD