How to Avoid Foreclosure

If you are late on your mortgage payments and fear your lender may foreclose on your home, then you should learn about the different ways you can avoid it.
This article discusses ways that involve your lender or loan servicer and ways that don't have to include them.
I will also mention a couple of things you can do that doesn't stop a foreclose, but will at least minimize your financial exposure. After you finish reading this article, you should feel some relief because you'll have practical and realistic ways of handling your situation.
Negotiate With Your Loan Servicer
When you are having trouble paying you home mortgage, you should immediately talk with your loan servicer. If you do and don't miss more than two or three payments, then they will more likely be cooperative. They can help you in several ways.
They can reinstate the loan, meaning that if you're able, you can pay what was late plus fees.
They can create a repayment plan that includes what you owe into your regular payments.
They can perform a loan modification that would change such things as the interest rate, the term of the loan or adding the missing payments to the loan balance.
If they think you are experiencing a temporary financial hardship, then they can give you a payment forbearance, which allows you to stop making any payments until you are once again able. However, once you are able to resume you must pay your regular payment and everything you owe in a lump sum.
If you are no longer able to afford the mortgage after considering the previous options, then a deed in lieu of foreclosure allows you to transfer title of the property to the loan servicer in exchange for canceling the remaining debt. However, the lender is not obligated to do this, and you still may owe taxes on the debt forgiven.
Things You Can Do Without Your Loan Servicer
Having and honest talk with your lender is the best strategy for saving your home and credit rating. However, there maybe a time during negotiations when you feel you still can't meet their requirements no matter how much you plead with them.
That is when you may consider professional help. You may want to hire a real estate agent to sell your home and use the proceeds to payoff the entire mortgage. This will save your credit rating. However, this strategy will work if you can close a deal before the foreclosure date. If you don't have enough equity, then you would still owe your lender the difference.
Other options include refinancing your loan at lower rates to making use of foreclosure prevention or loss mitigation experts who may charge fees to do much of what you can do on your own, but may only be good if they are legitimate and honest.
Your Last Resort
If your financial world falls apart, your last resort may be to file for bankruptcy. Under Chapter 13, you may be able to keep your mortgaged home. However, the courts will require and approve a repayment plan that uses your future income to satisfy your debts. After making all payments during a three to five year period, you obtain a discharge of some debts.
Bankruptcy isn't free. You'll have it on your credit records for ten years, making it difficult for you to get a loan for another home or financing a car payment.
This article has discussed the ways to handle your foreclosure using your lenders help and the help from third parties. It has also touched upon bankruptcy as a last resort. I hope that with the information in this article you can start to see clearly the choices you have and act in time to save your home from foreclosure.
Copyright © 2008 by Jackson Chan All Rights Reserved.