When you’re facing the possibility of losing your home in foreclosure, you may feel as if there is little you can do to change the process. However, there are several actions you can take that may help slow or prevent a pending foreclosure action on your home. These steps will also work to help keep your financial record as intact as possible.
Understand the Foreclosure Process
First, it is essential that you understand what foreclosure is and where you are in the process. Foreclosure is the process of your mortgage holder taking back your home after you have stopped making the payments you agreed to make when you signed a contract with them. By not making the payments, you have breached this contract and the mortgage holder has a legal right to take your home.
After you have not made any mortgage payments for 90 days, the foreclosure process starts and you will likely receive a Notice of Delinquency. This is a first step in what is often a two to twelve-month foreclosure process, depending on the laws in your state that govern this proceeding.
Carefully Read All the Notices You Receive from the Mortgage Holder
In the first communications that your mortgage lender sends to you regarding your late payments, there will likely be information regarding how to prevent foreclosure. As time goes on, there will likely be notices about the process and pending legal action. It is essential to read all of this communication so you are best equipped to use any options available to you.
Understand Laws Governing the Foreclosure Process in Your State
In some states, your lender will need to file a lawsuit against you before beginning the foreclosure process. However, other states do not have this requirement. Once you understand what your state’s laws are regarding foreclosure, you can gauge how much time you have to remedy the problem.
Contact Your Mortgage Lender as Soon as Possible
Mortgage lenders are motivated to work with you to help you remain in your home. There are several solutions they are likely to offer:
- Loan Modification: In this option, your mortgage lender changes the terms of your existing loan to make your monthly payments easier and more affordable.
- Repayment Plan: This involves working with your mortgage lender to create a payment plan that syncs with your budget and includes a way to make up for unmade payments.
- Refinancing: This is a new loan from the mortgage lender with a new term and interest rates that covers your past and present payments. The advantage of this option is that your credit is not negatively impacted and your mortgage payments may be lower.
- Forbearance: This involves the mortgage lender agreeing to suspend your mortgage payments for a specific time period, with any unpaid payments due at the end of your loan.
Access Government Assistance
In every state, there are federal agencies that work with mortgage lenders on behalf of those facing foreclosure. If you are unable to work directly with your mortgage lender to obtain relief, contact a Housing and Urban Development (HUD) counselor who may be able to help you obtain an affordable mortgage repayment option.
Understand if Bankruptcy is an Option
While bankruptcy is not the first option to consider when facing foreclosure due to the negative effect it has on your credit, it is worth exploring. Filing for bankruptcy can significantly delay a foreclosure proceeding and help you eliminate debt at the same time. Depending on your income, you may file either for Chapter 7 or Chapter 13 bankruptcy. Typically, those with lower incomes can file for Chapter 7, which erases debt and assigns a court-appointed trustee to sell all of the debtor’s non-exempt property to pay creditors. Those with higher income may do Chapter 13, which allows debtors to keep property while paying on a repayment plan to creditors.
Consider Doing a Short Sale of Your Home
If none of these options work to help you stay in your home, consider doing a short sale. This involves asking your mortgage lender’s permission because you would be selling your home for less than it is worth and they would have the final say on which offer for your home is accepted. Although this option involves you not keeping your home, it does avoid your having a foreclosure on your financial record – which is a significant obstacle to your moving forward.
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