10 Tips to prevent foreclosure

1 year ago

Foreclosure is inevitable when people fail to meet their home mortgage payments. Foreclosure means your money lender can legally repossess (take over) your home for non-payment, forcing you to move out. Should your property value be less than the total amount of your mortgage, a deficiency judgment could also be pursued.

Not only do you lose your home, you then owe your lender additional money. Needless to say having both a foreclosure and a deficiency judgement against you will seriously affect your future credit qualifications. Avoid foreclosures by following these tips.

1. Ignoring the Problem won't help.

The further behind you get with your payments, the more difficulty you'll have in reinstating your loan, and the greater the chance you will lose your house.

2. Contact your lender immediately.

Regardless of what some people may think, lenders really don't want your house. As soon as you realise you have a problem, let your lender know. They have various options which assist borrowers with their financial difficulties.

3. Open your mail.

Your first instinct when that dreaded notice from your lender appears in the mailbox is to ignore it. Don't do it. Those first notices are full of helpful information regarding foreclosure prevention options to help you weather those difficult financial issues. Once you've ignored the matter for some time, those notices suddenly take on legal tones and foreclosure courts will not take your failure to open the mail as an excuse.

4. Exercise your mortgage rights.

Loan documents make great bedtime reading as they can quickly put you to sleep. Nevertheless, make certain you read those loan documents so you understand what action your lender may take if you default on your mortgage payments. Be sure to familiarise yourself with foreclosure laws and timeframes in your state (it seems every state has different laws) by contacting the State Government Housing Office. Knowledge is a great tool should you find yourself in financial difficulty.

5. Understanding options for foreclosure prevention.

Google is just one great research tool when it comes to learning more about foreclosure prevention options (also known as loss mitigation). Look for State and Federal Government websites for more information.

6. Contact a reputable housing counsellor.

Housing counsellors are most helpful when it comes to helping you understand and wade through the options available. They can assist with organising your finances, negotiating with your lender should you need to and this service is often free or very low cost. One example of such an organisation is HUD in the U.S. (U.S. Department of Housing and Urban Development). If such an organisation is not immediately available in your area, charitable organisations such as The Salvation Army, etc., may also be of assistance to get you headed in the right direction.

7. Prioritise your spending.

Apart from you and your family's healthcare, maintaining a roof over your head should be your number one priority. It is essential you sit down with pencil and paper, start listing your expenses and see where you can cut corners in order to make those necessary mortgage payments. The first casualties should be the optional expenses; things such as cable TV, memberships, entertainment, etc. Then look at "unsecured" debt such as credit cards and see where you can delay payments so you can make that much needed mortgage payment.

8. What assets do you have?

Take a good, hard look at what assets you may have to sell for cash in order to reinstate your loan. For example, a second car, jewellry, a whole life insurance policy. Is there anyone in your family who could take on an extra job to bring in some much needed additional income. Even if these efforts don't bring in a substantial amount of cash, it demonstrates to your lender that you are making serious sacrifices to remain in your home.

9. Foreclosure prevention companies are to be avoided.

Legitimate businesses may approach you with promises of being able to negotiate with your lender on your behalf. Don't pay fees for foreclosure prevention help to companies who are making a profit. You are better off putting that money towards your mortgage. While these companies can help you, remember that they often charge hefty fees (often two or three month's mortgage payment) for information you can get free if you contact your lender or an organisation such as HUD who have housing counsellors specifically for your needs.

10. Beware foreclosure recovery scams!!!!

Don't lose your home to someone claiming they can stop your foreclosure immediately! The first thing you will be asked to do is sign a document appointing the firm to act on your behalf. Suddenly you may find you've become a renter in your own home because you've just signed over the title to your property. NEVER EVER sign a legal document without first reading it thoroughly, understanding the nature of the document and then seeking professional advice from either your attorney, a trusted real estate professional, etc.

Being aware of your rights, understanding the financial predicament you are in and seeking reliable, professional help will assist you immensely in keeing the home you've worked so hard for.


More from REAinUSA