Avoiding Foreclosure: Four Ways to Save Your Home
By Karen LawsonMortgage Credit Problems Columnist
Deciding what to do when you're facing foreclosure depends on your current finances and ability to repay your mortgage debt. An important step toward saving your home is understanding your financial situation.
Staying or Going: Can You Keep Your Home, or Must You Sell?
Mortgage lenders may offer a variety of foreclosure prevention programs depending on whether you can afford to keep your home or must sell it. Choosing whether to sell or not is a decision that should be made without emotion; being realistic about your financial situation can help in dealing effectively with your lender. If you decide to keep your home, here are some options to discuss with your lender:
- Temporary forbearance: This option is designed for those who anticipate resolving their financial problems within a specific time frame. For example, if you've started a new job after falling behind on your payments, you can ask your lender to delay foreclosure until you get paid. Forbearance works only if you can commit to a specific repayment date within a month or so.
- Repayment agreement: If you've missed several payments, it can be difficult to repay what you owe at one time. If you can bring your mortgage payments current over a specified time period, your lender may approve a formal repayment schedule.
- Modification of loan terms: Depending on the value of your home, and your ability to repay past due payments, your lender may be willing to reduce your interest rate, add past due amounts to your mortgage amount, and/or extend the term of your mortgage to lower your payments.
- Consumer debt counseling: When collectors are badgering you for credit card payments, it can be tempting to pay them first and let a mortgage payment go. If you have credit card debt, seeking help through credit counseling agencies can assist with regaining financial solvency.
If you can't resolve your financial problems, selling your home is preferable to losing it through foreclosure.
Stop Foreclosure by Selling Your Home
If you can't afford payments, and can't refinance due to owing more on your home than its current worth, ask your lender about accepting a short sale.You list your home at or below its current value, and your lender accepts the sale proceeds as full satisfaction of your mortgage loan. Discuss potential tax implications of a short sale with your financial advisor before listing your home for sale.
About the Author
Karen Lawson is a freelance writer with more than fifteen years of experience in mortgage banking. She holds an MA degree in English from the University of Nevada, Reno.
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