Options to avoid foreclosure
Wednesday, June 24th, 2009 Subscribe To Our Feed
There are several steps available to help you avoid a foreclosure. They start with one thing: action. If you have received a notice of default or are behind in your mortgage payments, this article with give you some tips on avoiding foreclosure on your home. To avoid foreclosure, you may first attempt to negotiate one of the following options with your lender:
Loan restructuring or modification
There are realty companies that can help you negotiate with your lender to get your mortgage in good standing again. There techniques available to get a modification approved, such as a separate payment plan for your delinquencies, or adding your delinquent amount to the end of your loan. You may qualify for a modification, especially if you have recently experienced a reduction in income or an increase in living expenses. Sometimes it is even possible to get your monthly payment lowered.
Short sale of your home
Short sale specialists can help you get your home sold fast, before it goes to foreclosure. In this scenario, the short sale specialist negotiates a short sale with your lender on your behalf. The mortgage company would accept less than the amount you owe on the loan, avoiding costly foreclosure proceedings. If a short sale is not successful, you can simply give the property back to the lender prior to a foreclosure sale and walk away not owing anything. This doesn’t do as much damage to your credit as a foreclosure.
There are steps you can take to avoid foreclosure that can be done on your own, without the assistance of a short sale real estate agent:
- Reinstatement - Reinstatement of your loan by paying your lender all the past due amounts to bring the mortgage current. This may not be feasible if the situation keeping you from making your payments hasn’t changed.
- Mortgage Refinance - Refinance your total debt load, or extend the term of the loan to reduce your payments. However, this is not very feasible if you owe more on your property than it’s worth. If you have received a Notice of Default already, then you probably are not able to do a loan restructuring plan or refinance. Only as a last resort should you consider bankruptcy or allowing the bank to foreclose.
- Bankruptcy - You may qualify for Chapter 7 Debt Elimination or Chapter 13 Reorganization. Bankruptcy stays on your credit for 10 years.
- Foreclosure - This is the most damaging to your credit other than bankruptcy. The lender will take your home and all of your equity. This stays on your credit for seven years.
In these difficult financial times, many homeowners are able to benefit from the services of experienced real estate agents who specialize in foreclosure avoidance. They routinely negotiate the above options and help their clients avoid foreclosure.
Tips to avoid foreclosure
Don’t ignore the problem
The further behind you get, the harder it will be to get your loan into good standing and avoid foreclosure. Contact your loan company as soon as you realize you will have trouble making your payment. Lenders prefer to be in the lending business, not the real estate business, so they do not want your house. They all have options available to help you through tough financial periods.
Open and respond to mail from your lender.
The first few notes you get from your mortgage company usually offer excellent information about how to avoid foreclosure and get through your financial problems. Later notices from your mortgage company may include important information about pending legal action – it’s important to read these. Failure to open your mail is not a viable excuse during foreclosure proceedings.
Know your rights
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and time frames in your state.
Track your spending
Besides your health care, holding on to your home should be a top priority. Review your bills and expenses to look for areas you can cut spending so you can make your mortgage payment. Look for optional expenses – cable TV, memberships and entertainment that you can eliminate.
Contact a real estate company that specializes in loss mitigation
If you are unable to make you mortgage payment and are in jeopardy of losing your home, contact a reputable loss mitigation company to help you by negotiating with your lender to resolve your situation.
Documents you will need
These documents will generally be requested in order to process your loan modification package:
- Hardship Letter - A letter from you to your lender explaining why you are having trouble making your payments.
- Financial Statement - This shows where your money goes and how much is left over after paying your bills. An experienced short sale agent can provide the appropriate forms to itemize your finances and show hardship.
- Bank Statements - Last two months of bank statements – checking, savings, etc.
- Mortgage Statements - For all loans associated with the property, you need to collect the most recent mortgage statement & account number.
- Pay stubs - Last two months of pay stubs, or proof of unemployment.
- Tax Returns - Last two years of tax returns including W2’s.
Once all necessary documents are collected, the negotiation process can begin with your financial institution.
Where to go from here
- Find out if you qualify for a short sale.
- Get referred by an expert Vacaville real estate agent to a professional near you.
