How to Avoid a Mortgage Foreclosure
Foreclosures are not good for the lender, your credit score or the neighborhood's property values. Fortunately, many lenders are willing to help you work out a program to stay in your home. Sometimes this includes lower interest rates, resulting in lower monthly payments, and late payments attached to the end of the loan, to make the debt more manageable.
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Instructions
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Evaluate your financial situation. Give your household budget a closer look to discover where you can eliminate spending. Determine what amount house payment you could realistically begin paying.
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Contact your lender. Mortgage lenders do not want your property back, and will often work with the borrower to keep them in the home. Ignoring the situation and dodging calls from the lender will not help forestall a foreclosure. Yet, your bank may tell you they won't work out a program until you are a few months late on your payment. Don't assume this is the situation, so talk with your lender first.
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Document all correspondence with the lender, and the status of any work-out program. When you do speak with the lender, be polite and express that you really want to stay in your home.
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Stay in your house. Lenders typically will work with a homeowner who is still living in the home, and wants to stay there. However, if you aren't living in the property, it will be more difficult to get the lender to work with you.
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Be realistic. While the bank may be willing to lower your interest and bring down the monthly payment, will you be able to make the new payments? Look at the current value of your house, and calculate if payments would be lower on the current value, as compared to your loan amount. If the housing market has significantly dropped in your neighborhood, it is possible your lender may consider reducing your loan amount, if they determine it will cost them more to foreclose and try reselling the property, at that lower current value. They may not be willing to consider, yet some might.
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Contact a foreclosure avoidance counselor. Information on locating legitimate foreclosure counseling services can be found on the HUD website (link in Resources.)
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References
Resources
- Photo Credit A. Johnson
