If you’ve lost your job or have fallen on hard times, you may be facing the stark reality that you can’t pay your mortgage payments. The thought of losing your home can be distressing. Banks can foreclose on your home if you fall behind or can’t make your payments.
Losing your home to foreclosure is scary. Not only are you forced to relocate but it can also impact your credit and your ability to buy a home in the future. Many times, our financial hardships are temporary. Don’t let these setbacks ruin your financial future. As a homeowner, do everything you can to avoid foreclosure.
How to Avoid Foreclosure
Take control of your situation to avoid foreclosure on your home. The following are some helpful tips:
Contact your lender
Whether you are currently experiencing financial hardship or you expect to in the future, be proactive and speak to your lender. They may be able to provide assistance. There are many government programs that banks can use to help homeowners who are facing difficult financial times. Banks may also have their own programs that offer assistance. Through these programs, you may be eligible for loan modifications or other work-out arrangements. By contacting your lender, you may prevent the foreclosure process altogether.
Don’t ignore the problem
The worst thing that you can do is ignore the problem and hope it will go away. It won’t. Open bills and notices that you receive in the mail. Answer the calls from your bank. It is hard to face mounting financial debt, but your situation is not hopeless. Take control of the problem and show your lender that you are seeking a resolution.
Read your mortgage documents
While this may seem like a cumbersome task, read your mortgage documents. They can give you greater insight as to what your commitment is and what options may be available in the event that you fall behind.
Prioritize your spending
Making your mortgage payment each month should be your top priority. Start by taking a good look at where you spend your money. Cut out any unnecessary spending on things that are not necessary. While electricity is essential, cable TV may not be. Find ways to save money on items that your family needs, such as food and personal items. While it may only be a few dollars here and there, it will add up. You may able to negotiate payment arrangements and extensions with other creditors, allowing you to focus on paying your mortgage first. Until you get back on your feet, you may be able to pay monthly mortgage payments by cutting out unnecessary purchases and shifting payments around.
When all else fails, there are still options
A workout or loan modification option may not be enough assistance for you to continue making your mortgage payments. In those cases, there are still options available.
- Pre-foreclosure sale – With a lender’s approval you can try to sell your home at its fair market value. You may owe more money on your home than its fair market value. These sales are commonly known as “short-sales.” In some cases, lenders may be willing to forgive the difference between what you owe and what they received from the sale. Some programs also pay an amount toward your relocation costs. When structured properly, a short-sale is a way for your lender to salvage some funds from the sale of your home, as well as remove your obligation.
- Deed in-lieu of foreclosure – In some circumstances, you may be able to give your home back to the lender. Depending upon your arrangement with your lender, you may be able to reduce most, if not all, of your obligation to them quickly.
You Can Avoid Foreclosure
Life is full of uncertainties. Job loss, divorce, unexpected bills, long-term illness, or loss of overtime hours are among the many things that can lead to financial hardship. Falling behind or failing to pay your mortgage payments puts your home at risk for foreclosure. While your situation may seem dire, it’s not hopeless. Be proactive, speak to your lender, explore your options, and prioritize your spending. By taking control of your financial situation, you can avoid foreclosure.