How to Avoid Foreclosure

In today's economy and especially with the burst of the housing bubble and continually increasing interest rate, more and more people are facing foreclosures. Adjustable rates are sky rocketing and mortgage payments are becoming more and more expensive. If you are worried about possibly losing your house to foreclosure, learn some helpful tips to help avoid bank foreclosure and losing your home.

Difficulty: Moderate

Instructions

Things You'll Need:

• phone
• a copy of your mortgage agreement
• number for your bank/mortgage holder

1. 
    

   Refinance!
   Your best option if you are facing high mortgage payments because you have an adjustable rate mortgage is to refinance. You can refinance and lock in at a lower interest rate on a fixed rate mortgage. It is actually a really simple way to lower your interest rates and lower your monthly mortgage payment. It will cost you some money up front, but it you can afford, this is your best option if you are facing foreclosure.

2. 
    

   Seek Out Mortgage Relief!
   Call your mortgage company the minute you know that you will not be able to make a payment. Do not wait until the second payment you can not make. Many mortgage companies, especially today, do not want to foreclose on your house because they need to be able to collect money and recover themselves. Call and explain your situation and tell them realistically what you can pay and when. Most companies will give you some leniency for at least some time.

3. 
    

   Ask for forbearance!
   If you call the mortgage company and ask that they allow you to miss a payment, the interest will still continue to accrue each month. You can ask your company to put the loan into forbearance for a limited time. They normally will at most give you a few months but this can sometimes be the difference between keeping and losing your home.

4. 
    

   Modify Your Loan!
   If you have relatively good credit, but haven't been able to make your payment for between 30 and 120 days, you may be able to modify your loan. This is called loan modification. Since you have good credit you are a relatively safe bet for a bank or mortgage company and they want to keep your business. Ask if the bank can lower your interest rate or extend your payment plan.

5. 
    

   Short Sell Your Home!
   This is the last option. If you bought your home without putting money down and now your mortgage payments are going up and your home value is going down, you may want to short sell your house. Basically, you will sell your house for less than what it is worth and the bank agrees to avoid all the costs associated with foreclosures. This wipes out the money you owe the bank in most situations. However, you have to pay the taxes which depending on the value of your home may be expensive.

Tips & Warnings

• The best thing to do if you feel like you are getting into trouble is to call the bank or mortgage company. Being proactive will help you to keep a solid great rating and give you more options in the long term!
• Carefully examine your budget to make sure there isn't somewhere else you can cut costs to avoid foreclosure
• Be careful with "Get Out Of Foreclosure Today" type schemes. If it sounds to good to be true, it probably is and could leave you in even more debt.

Resources

• US Dept of Housing

[WordWhizKid]

on 1/26/2009 Great resources and very timely! This will help a lot of people. 5*s!

[TheGlamSquad]

on 1/23/2009 This is a very great informative article. So many people are trying to avoid forclosure do to our economy. Thanks for sharing! 5*****