When a homeowner first buys their home foreclosure is probably the furthest thing from their mind. Today’s economy has forced millions of home owners into a potential foreclosure situation.
There are many reasons why people go into foreclosure. Some of those reasons include:
- Job loss
- Unexpected death, illness or medical emergency
- Adjustable rate mortgage increase
- Unexpected home maintenance expense
There are ways to avoid foreclosure. The best way to avoid foreclosure is to prevent the filing of a Notice of Default. If a home owner knows they are unable to pay their mortgage they should immediately call their lender.
Lenders do not want to foreclose. They may be willing to work with the home owner but it is important that the home owner doesn’t ignore contact from the lender.
The lender may propose several options:
- Forbearance
- Lenders may agree to a repayment plan before taking legal action
- Debt Forgiveness
- Very rarely the lender might give you a break and waive your obligation.
- Repayment plan
- The lender may agree to spread the payments out over a longer loan term.
- Modification
- In some cases the lender may agree to freeze the interest rate of an adjustable rate loan or extend the amortization period.
- Refinance
- Adding payments to an existing loan balance may be an option if the home owner has sufficient equity and meet the lender’s guidelines for refinance.
- Partial Claim
- Certain government loans may contain provisions that allow the home owner to apply for another loan to pay back missed payments.
Preventing the Notice of Default filing is the best way to prevent foreclosure. If none of the above options have worked there are still some options a home owner can leverage. Once the Notice of Default iI s filed the home owner only has a small time frame to reinstate the loan by bringing the payments current and pay the costs of filing the foreclosure.
If you are unable to make up the payments you still have a few options:
- Sell your home
- If you have equity in your home a quick sale is probably the best option at this point. Your home will need the best exposure and marketing to achieve the quickest sale possible. A full marketing plan and the proper price positioning should get your home sold in time to avoid foreclosure.
- Attempt a short sale
- If your home is worth less than the amount you owe, you might be a candidate for a short sale. A short sale is when you sell your home for less than what the amount owed. A short sale will affect your credit rating but not as bad as a foreclosure. A short sale is negotiated with the lender.
- Deed in lieu
- The homeowner deeds the property back to the lender by giving the lender a properly prepared and notarized deed, and the lender forgives the mortgage.
For more information on how to prevent foreclosure visit the U.S. Department of Housing and Urban Development site to Avoiding Foreclosure. http://portal.hud.gov/hudportal/HUD?src=/topics/avoiding_foreclosure
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