In today’s economy, losing one’s home to foreclosure is a very real threat.While job loss is the most common situation that leads to foreclosure, other things happen that could also lead to this fate. For example one might get sick and face costly medical bills, overextend financial help to family and friends who fail to pay them back, or take out a loan and then become unable to pay back the bank.
Before the recession hit, it seemed like everyone could afford to buy a home! Lenders competed against one another with lucrative rates and a wider range of mortgage options than ever before. Now that the country is in a recession, foreclosure is taking the houses that people worked so hard to buy just a few short years ago. Unfortunately foreclosure leaves some people still owing a hefty balance for a home that they lost to the lender who sold it to them in the first place!
3 Tips to Help Avoid Foreclosure
It seems once the mortgage payment falls behind, catching up is nearly impossible. But instead of facing each new day pretending that everything is fine, it is best to tackle the problem headfirst to help avoid foreclosure, which is not only costly but could also have a lasting effect on your credit report. Here are some tips to help homeowners avoid foreclosure and take some of the sting out of facing such a fate.
1: Face the problem. It might seem natural to try and ignore the problem, but that does not make the problem go away. In fact, ignoring the problem now only makes things worse later on down the road! Instead of tossing those letters from the service provider into a drawer where they are out of sight and mind, get on the phone to see if your service provider offers any type of assistance programs. When they know you are willing to communicate they are more willing to help you.
2: Consider all the options. The stress of a looming foreclosure can feel like there is a literal weight on your shoulders. Left unchecked it can even cause you to feel symptoms that could mean a problem with your physical health. Relax and think through all your options. You may consult an advisor who might suggest options you had yet to weigh, or attempt to get the loan restructured to a more manageable monthly mortgage rate.
3: Plan to sell your home to avoid foreclosure. If you find yourself unable to make mortgage payments from one month to the next, then perhaps it is time to sit down and take another look at your budget. Add up the money that you bring in each month and compare it to the bills you pay out each month. If your mortgage is too much for you to afford from one month to the next, then perhaps it is time to sell.
If you tried making your mortgage rate a priority, sat through credit counseling sessions, tried working with your lender to get into a program, and so forth to no avail then it could be time to let go of your home. Homeowners with enough equity can sell their home, pay off the balance, and walk away with enough cash leftover to purchase a home with a more reasonable mortgage payment.
Selling a home not only saves having a foreclosure on their credit report even though that is not the best option, but it could also mean not losing one’s home to bankruptcy. While some homeowners assume that their home is safe when they declare bankruptcy, it is not a guarantee. Bankruptcy has a negative effect on credit score and should only be considered as a last potential resort to keep one’s home from being foreclosed upon. All in all, considering a sale is still a much more lucrative option.
When the amount that your house sells for is not enough to cover the balance of the loan, the lender may agree to accept less money for the house than what is owed. This type of transaction is called a short sale, and while it erases your debt it will stay on your credit report for the next two years. Some homeowners who have suffered through a short sale were able to receive a portion of the money from the sale that they then used to pay off liens against the property or to help with moving costs to transport their belongings to their new home.