Read These Expert Tips To Keep Foreclosure Out Of Your Future
(DailyDig.com) – Foreclosures rose during the latter half of 2022, but remain relatively low — for now. However, each one represents a household facing eviction and the loss of their home. For many people, facing foreclosure also means that it is hard to buy, or even rent, a new place to live.
Avoiding foreclosure should matter to all homeowners, but sometimes circumstances are such that it can be very hard to make mortgage payments. The loss of a job, long term sickness, or other financial difficulties can make what appeared to be a very reasonable premium suddenly unreachable.
So, how can someone avoid foreclosure?
Negotiate With the Lender
Lenders would also prefer to avoid foreclosures. They would much rather get their money back. Properties sold under foreclosure often fetch less than the amount of the loan.
When your financial circumstances change, you should immediately contact your mortgage servicer. Even if you are, for example, confident you can quickly find another job.
Most lenders are willing to work with you and have a mortgage assistance program, or can modify your loan. The latter may give you more debt in the long term, but can get you out of trouble in the short term. Your lender might also suggest refinancing, work out a payment plan, or get forbearance.
Another option is to short-sell your home or use a deed-in-lieu of foreclosure. In this case you will still lose your home, but will take less of a hit on your credit and will have a much better chance of finding another place to live.
Do not ignore the problem. It’s a lot harder to negotiate with the lender if you wait until you can’t afford your payments.
The Making Home Affordable Program
The Making Home Affordable Program is a program of the U.S. Department of the Treasury and the U.S. Department of Housing and Urban Development. The program gives access to housing counselors who can help you with your next steps and help you avoid foreclosure scams.
They can also tell you if you are eligible for the Home Affordable Modification Program, which is designed to help out people with long term income loss and/or increases in expenses (such as a family member becoming disabled). This program coordinates with existing lenders.
Budget and Prioritize
Those who can’t make their mortgage payments need to decide whether to prioritize keeping their home. If staying in the house is not a priority, then the option of short-selling has to be considered.
Otherwise, developing a budget that cuts other expenses, especially if the issue is short term, is a solid way to avoid foreclosure. Obviously, don’t borrow from Peter to pay Paul, but sometimes cutting out even a few luxuries can make the difference. Take responsible actions to save cash.
File for Chapter 13 Bankruptcy
The word “bankruptcy” is scary, but for some people filing for Chapter 13 (not Chapter 7) bankruptcy can be a good way to save your home. It can give people time to get current on their payments so they can save their home. Through Chapter 13 bankruptcy, a payment plan is set up to pay the late payments over the length of the plan, usually three or five years.
It only works for those with enough income to stay current and pay off basic expenses, so is primarily for people who now have income but who got behind during temporary income loss. And given the impact on credit scores and reports, bankruptcy should be explored only if other options, such as negotiating with the lender, have not worked.
Avoiding foreclosure is important, not only to keep a roof over your head but to avoid long term credit score problems that can make even renting a home a challenge. To do so, your best option is to talk to a housing counselor and negotiate with your lender, but there are other options that can help you keep your home.
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