Running into financial trouble could put your home at risk of foreclosure. Rather than risking it, learn the top ways that you can prevent this from happening to you. While none of these ways are foolproof, they can pave the way to a better financial future for you with good effort.
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Stay in Contact With Your Lender
The number one mistake borrowers make when dealing with
financial troubles is not informing their lender. The best thing you can do is be honest with your lender. Let them know what you are experiencing. This gives them a chance to go over options with you that might help you save your home. Remember, the last thing your lender wants is to take possession of your home. They want you to pay your mortgage, so they likely have options available to help you get back on track.
Your lender may have several options for you including:
- Accepting partial payments – Some lenders are willing to accept partial payments with an agreement to make up the difference by a certain date. Each lender will have their own terms and language that they use. Make sure you understand the terms explicitly so that you can make the most of the situation.
- Loan modification – Your lender may also suggest that you apply for a loan modification. This program will redo your loan at either a different rate or possibly even knock off some of the principal to lower your payments. Either way, you end up with a payment that they believe you can afford and a second chance at keeping your home.
- Forbearance – Some lenders will offer the chance to stop making payments for a specified period. You will then be required to make up the difference either all at once, if you have a windfall coming in such as a tax return or over a period of time split evenly among the payments.
Apply for HARP to Prevent Foreclosure
If you are not yet behind on your mortgage payments, but they are becoming hard to afford, you may want to consider HARP or the
Home Affordable Refinance Program. This program helps to lower your mortgage payment by either giving you a lower rate or lengthening the term of your loan.
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The best news about this program is it doesn’t matter if you are upside down on your home. Your home’s value could have dropped and you could still benefit from it. This way you can have a payment that is more affordable, helping you to get out of the upside down status and helping you to stay in your home.
Leaving Your Home
If you decide you just can’t stay in your home any longer, don’t just let it go to foreclosure. If you want to protect your credit and be able to have choices for homeownership moving forward, you’ll want to use one of the following options:
- Short sale – You can ask your lender for the opportunity to sell your home for less than the amount you owe. Your lender will come up with a viable number and must approve the sale before it goes through. In exchange for the short sale, you give up the home, but don’t have a foreclosure on your record.
- Deed-in-Lieu of Foreclosure – Your lender may also offer a deed-in-lieu of foreclosure, which means you hand over the deed, and walk away from the home. This is a voluntary program, which means you can leave the home immediately or take 3 months after making the decision. The lender may even offer the option to lease the home from them for 12 months.
Sell Your Assets
If you have assets you can sell to help you get current on your home loan, use them. A few examples include jewelry, cars, or stocks. Anything you can sell to bring your account current can help. These options may not be your first choice as they deplete your assets, but they can help you stay in your home.
If nothing else, this shows the lender a good faith effort in trying to stay in your home. Your lender will be able to see that you want to do what it takes. They may take this effort in stride and offer you one of the above options, such as forbearance or a payment arrangement to help make getting current even easier on you.
Don’t assume if you can’t make your payments that you must go into foreclosure. You have options, even if you have to ultimately leave the home. There are better options available that will help you be able to preserve your credit and have choices moving forward.
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