Summary: Skipped on your mortgage payments? Worried about losing your home to a foreclosure? Here are a few things you can do to stop that foreclosure.
Losing your home to a foreclosure might be something you may be worried about, if you haven’t been able to make your mortgage payments on time. Your mortgage lender can exercise his right to repossess your home by applying for a foreclosure if you have skipped your payments for a period of three to six months.
Here are a few things you can do, in order to avoid a foreclosure:
Take action as soon as possible
Skipping payments is not a situation you can be proud of. It can lead to a whole lot of problems in the future, one of which is foreclosure. Once you know you have missed out on a couple of payments, it is important that you get current with your loan. The more you wait, the harder it might get to get your loan reinstated. With time you may even have to let go of your home. So if it is a temporary financial hardship, try and make some arrangements as soon as possible to get current with your payments.
Contact your lender at the earliest
If you have not been able to make your mortgage payments regularly, avoiding your lender may not be the right thing to do. Such situations can only lead the lender towards taking legal action against you. However, this doesn’t mean the lender is out there to take your home into possession. In fact that may only be his last resort to get back his money. If you contact your lender and discuss your financial situation, he may come up with a number of options that can help you pass through your difficult financial times, without getting into a foreclosure.
Acknowledge mails from your lender and respond to them
Ignoring mails that your lender sends you requesting for payment, will do you no good. In fact it might make you miss out on important notices that might cost you dearly. The first notice that you may have received from your lender, after skipping those critical monthly payments, can actually contain good information. If you go through this mail you will come to know about foreclosure prevention options, and find a way to weather those financial problems. At this step if you fail to take action, the next mails that you may receive would be notices of pending legal action. You cannot use the excuse of not opening the mail in the foreclosure court.
Understand your mortgage rights
Every borrower has some rights that he can use to make his payments affordable, during times of financial difficulties. All these rights would be detailed in your loan documents. Going through these documents carefully can help you understand your options when you are unable to make your payments. It will also let you know about the actions that the lender can take once you stop making your payments. You can also make an attempt to contact your State Government Housing office and understand the foreclosure laws and timeframes that apply to your state. These things differ from state to state.
Explore your Foreclosure Prevention options
There are many ways to prevent foreclosure. If you want to retain your home your options would include:
• Repayment plan: This would be an effective alternative if your financial hardship period has passed and you are ready to get current on your mortgage payments. In this plan your lender will spread out your arrears over a period of time, which could be anywhere between 2 to 18 months. During this period you will be making your regular monthly payments along with an additional amount towards arrears. You may be requested to make a good faith payment up front before your lender agrees to a repayment plan.
• Loan Modification: This would be an effective option if you are not able to afford your mortgage payments due to a permanent change in your financial situation. This would change the structure of your loan via a reduced interest rate or an extended time period so as to reduce your monthly payment amount. You may require the help of a loan modification counselor to get your loan modification application approved. Some such counselors may even get in touch with you through loan modification live transfer leads.
• Forbearance: This could be a viable option if you are facing a temporary financial hardship for a certain period of time due to an injury or disability. In this option your monthly payments would be suspended for a certain period of time after which you may have to cure your delinquency by making a lump sum payment or by qualifying for a long-term repayment plan.
• Refinancing: Another option to reduce your monthly payment is to get your loan refinanced at a lower interest rate, extended term or a conversion (from ARM to FRM). This would be a viable option if the loan modification counselor who came to you via loan modification live transfer leads, was not successful in getting your loan modified. However, this option comes with refinancing costs such as application fees and appraisal fees that you may have to consider while shopping around for best rates.
In case you are not interested in retaining your home, you can always sell, or short-sell your home, or even go for a deed-in-lieu where the lender gets the possession of your house.
Get in touch with a HUD-approved housing counselor
It may not always be clear what option to choose when it comes to preventing a foreclosure. This is where a HUD-approved housing counselor can come to your rescue. Apart from helping you decide on the right option, such a counselor might also help you organize your finances and negotiate with your lenders on behalf of you.
Reduce your expenses
If retaining your house is your top priority you have to make sure you cut down on your spending. Start budgeting your expenses and look for those that you can eliminate. Try delaying your payments on your other debts until you are current on your mortgage payments.
Liquidate your assets
If you have any other assets such as some jewelry, a second car, or even a whole life insurance policy, you can sell that and get your loan reinstated.
These efforts may not really increase your cash flow to the extent of preventing a foreclosure; but they can demonstrate to your lender that you are doing your bit to keep your home, especially if a loan modification counselor who came to you via loan modification live transfer leads, is negotiating with your lender, to get your loan modified.
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