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How to Avoid Home Foreclosure
By Susan Willets | June 11, 2008
Steps to Take to Avoid Home Foreclosure
No lender wants to hear the words “I can’t pay my mortgage!” but let’s face it, times are tough and money is tight. If you can’t afford professional financial assistance, then here are some steps you can take on your own to avoid home foreclosure:
- Don’t Ignore the Problem - As soon as you start having difficulty paying your mortgage, or receive a notice from your lender, take immediate action to resolve the problem. Lenders want to work with you to resolve the issues and get your mortgage back to current.
- Keep Communication Open with Your Lender - This allows for both parties involved to keep current on the status of your repayment. By offering the information about when you will be making payments and how you are going to rectify any late payments, your lender can be assured the problem will be fixed and they will not need to start foreclosure processes to get their money.
- Know Your Mortgage Rights - Read over your loan to find out what the lender may do if you are unable to make your payments. Research foreclosure laws and timelines for your state.
- Research Loss Mitigation Options - This is a process where the lender tries to help a borrower who is unable to make loan payments and is in danger of defaulting on their loan. For more information, see our Loss Mitigation page.
- Contact a Housing Counselor - If you are not comfortable working directly with your lender, housing counselors can help for little or no fee. Be wary of businesses offering to contact your lender for you. While they may be legitimate businesses, they often charge a hefty fee for their services. HUD offers housing counselors free of charge or your lender may offer counselors as well. Housing counselors will:
- Review your financial situation, determine what options are available to you, and negotiate with your lender
- Learn about different options that lenders will consider and find the best choices for you and your family, based on your circumstances
- Call the lender with you or on your behalf to discuss a workout plan
- Protect you from future credit problems before you get too far behind on mortgage payments
- Give you information on services and programs in your area that provide financial, legal, medical or other assistance
- Make a Budget - Regardless of whether you pursue outside help or handle matters on your own, it is crucial that you develop a budget that will prioritize your bills and allow you to find areas you can cut back in if needed (entertainment, eating out, etc.). Be sure to cover the essentials first (food, water, shelter, etc.). There are many agencies that can help develop a budget as well.
- Use Assets for Help - Do you have assets (a second car, jewelry, etc.) that you can sell to obtain money to reinstate your loan? Consider getting a second job or possibly someone else in your family can get a job to help. Even if these options don’t bring in significant cash flow, they show the lender that you are working to rectify the situation.
- Prevent a Notice of Default - Immediately start working towards a solution when you have difficulty making your mortgage payments. There is much to be gained by efficiently fixing the problem and working with your lender. Your goal is to prevent a notice of default from being filed as that is the beginning stages of the foreclosure. Do everything in your power to fix the problem before it reaches this point.
- Fix a Missed Payment - Use the above strategies to make up a missed payment as soon as possible before the problem gets worse. Time is of the essence to avoid penalties, late fees, etc. By acting quickly to resolve these problems, you can gain both peace of mind and protect your home.
Topics: Avoid Home Foreclosure |