Avoid ForeclosureDo you want to avoid foreclosure? If you are behind a payment or two on your mortgage or if you realize that you are going to need some relief in order to avoid falling behind, get in touch with your lender right away. You may want to discuss refinancing and/or modifying your loan. Both may be options assuming that your income is stable and you are not "under water" on your home, i.e. you owe more on your home than it’s worth in today’s market. We are not saying that it will be easy to avoid foreclosure once you’ve fallen behind on your mortgage. There are many reports of homeowners who try to figure out a way to hold on to their homes but get nothing but the run around from their lenders. But if you believe your home is worth fighting for, then fight as hard as you can. How to Avoid ForeclosureRefinance. Refinancing your existing loan involves getting a new loan you can afford, and using the loan proceeds to pay off your current mortgage. If your lender refuses to refinance your loan, shop around -- some lenders may be willing to work with you. If you are unable to find any lenders willing to work with you -- maybe because the value of your home is less than the total amount you still owe on it, or because your credit is damaged -- a federal Home Affordable Refinance loan may be the answer, assuming your current loan is guaranteed by Fannie Mae or Freddie Mac. To find out if you qualify for a Home Affordable Refinance go to the Making Home Affordable website. Modify the terms of your loan on a temporary or permanent basis. You may be able to continue paying on your mortgage if your lender will agree to change the terms of that loan -- lower the loan interest rate and extend the loan period, for example. Your lender may offer its own modification program, or you may be eligible for a Making Home Affordable (HAMP) loan modification. Visit the Making Home Affordable website to determine if you qualify for a HAMP modification. At this site, you’ll also find an online payment estimator for calculating your monthly mortgage payments if you qualify for a modification. Ask your lender about forbearance. A forbearance agreement gives you some breathing room when you are experiencing a temporary financial crisis by letting you pay a portion of your regular mortgage payment or maybe even no payment at all, for a limited period of time. Once that period ends however you’ll have to resume making your regular loan payments and you’ll also have to pay something extra each month in order to pay down the past due amount on the loan. In other words, you’ll be obligated to pay more to your lender each month than you were when your money troubles began. Therefore, it’s critical that you not sign a forbearance agreement until you’ve read it very carefully, understand all of its terms, and unless you are sure that you can live up to each and everyone of them. Ask your lender for a payment plan. If you’ve missed just a few mortgage payments and your income is stable, your mortgage company may let you get caught up over time according to a written schedule you both agree to. Depending on who holds your loan, different options may be available to you. For example, if you qualify for Fannie Mae’s Long-Term or Permanent Hardship Payment Reduction Plan,™ your payment can be reduced by up to 30% for no longer than six months. During that time, you will need to identify and implement a permanent solution to your mortgage problem. A housing counselor may be able to help you identify payment plan options you can afford. Look into a HomeSaver Advance™. A HomeSaver Advance is a federal unsecured personal loan designed to help you get current with your payments so you can avoid foreclosure. It’s one of the few legitimate "stop foreclosure loans" available to those who don't qualify for a traditional loan refinance. However, you are only eligible for this kind of loan if Fannie Mae owns your mortgage and your mortgage problems are due to a temporary financial hardship. For more information about this option, go to the Home Saver Advance website. Turn your home into a rental. You may want to find one or more roommates to help cover the cost of your mortgage payment, or you may want to rent out your home and move into an apartment or home you can afford. This is a good option only if the rental income from your home will cover the amount of your mortgage, your homeowner’s insurance, and your property taxes (assuming those two expenses are not included in your monthly mortgage payments). You’ll also need to make sure you have money for any repairs and maintenance that need to be done to your property, and you’ll have to be able to follow the landlord-tenant laws in your state and community. Before you rent out your home, make sure you check those rules. Find someone to assume your mortgage, assuming the loan is assumable. When someone assumes your loan, that person takes over the payments in exchange for becoming the owner of your home. This could help you avoid foreclosure, but please do your homework before you pursue this option! Most loans are not assumable so you will want to need to come up with the money to hire a real estate attorney to review your loan agreement so you can be sure that an assumption of your loan is legal.
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