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Finance

How to Avoid Foreclosure

If you’ve missed more than three mortgage payments you may be nervous about foreclosure looming. Or, you may have reason to worry if your lender has filed a Notice of Default, or NOD, against you. You may also think that you have no options at this point but you do. There are things you can do to get yourself out of this situation to either work to save your home or mitigate the damage being done to your credit. Here is how to avoid foreclosure.

Loan Modification

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If you call your lender early enough in the foreclosure process, they may be willing to work with you on a loan modification. This is a re-structuring of your loan that may extend payments out further to lower the payment amount, may lower interest rate to lower payment amount, or there may be other options as well. You don’t know how you can modify your loan unless you call.

Forbearance

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Some lenders can stop payments for a short period of time if you are having trouble making payments due to job loss, short term disability, or other unforeseen circumstance. Call as soon as the trouble arises so that your mortgage company is aware of the situation and they can help.

Refinancing

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If you haven’t become late in payments yet but you are having trouble making them, you might want to look into a refinance. It can help you to lower interest, extend payments, or even both so that your monthly mortgage payment is lower.

Short Sale

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If you are already in the foreclosure process and your home is up for sale it may be in your best interest to aggressively try to sell your home. The bank will need to find a buyer for the home anyway once they foreclose. If you come to them with a reasonable offer from a buyer before the foreclosure process goes through, you can sell your home before the process is complete, avoiding foreclosure altogether. Usually, this results in selling the home for less than what you owe and you will be responsible for the remaining balance unless your bank forgives it. A short sale still impacts your credit but not as much as a foreclosure will.

Bankruptcy

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A bankruptcy will stop the foreclosure process. However, you will still be responsible, in most cases, for the debt of your home. There are two types of bankruptcy and it is important to know which you qualify for and if it is even a good strategy for you considering your circumstances. It is best to speak with a bankruptcy lawyer to look over all options open to you.

Avoiding a foreclosure is possible if you find yourself in tough waters financially and not all of them result in you losing your home. If you need to keep your home, speak with your lender as soon as you get into trouble and see what your options are. You may just be surprised at how willing they are to work with you. They want to see you keep your home as much as you do.

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