This subject has hit home for me lately. I don’t even have a mortgage yet, so it’s not a personal situation, but someone I know is going through some financial issues right now with their mortgage. This is the first time that I’ve been affected by it on a somewhat personal level. Here are five things you can do to help prevent foreclosure:
- Negotiate with your mortgage lender. They won’t talk to you at first, so you need to show them proof that you can’t afford the payment anymore. Explain the situation to them in a “hardship letter” and send the letter by certified mail so that you have confirmation that it was received by a human being. If there is a life even such as a death in a family, loss of job, change of job, or unexpected illness, then explain this to them. Mortgage companies don’t want these properties. They’ll take them if they have to, but many of them are now willing to work with borrowers to help them save their houses.
- Ask for a short-sale. Selling your house before you fall behind on your payment is the best thing you can do, but that’s easier said than done. However, right now you might be able to find a first-time home buyer looking for a deal. Ask your lender to agree to a short-sale deal. This means that if you owe more on the house than its fair market value, the mortgage company will agree to sell the house at a lower price than it’s worth without keeping you liable for the remaining amount on the loan. Short-sales are tough deals to make, and many buyers get turned off by how complicated they can be, but this is a great option if the lender is willing to do it.
- A Deed in lieu of foreclosure. This is still a foreclosure, but it’s a little nicer foreclosure. Basically, the advantage to it is that the borrower and the lender transfer the property from the borrower back over to the lender like a foreclosure, but without the extensive foreclosure proceedings including all of the fees associated with foreclosing on a borrower. Lenders like it, and borrowers have less of a burden handing over the property to the lender.
- Start working extra jobs. If lack of income or a change in jobs with a lower income is all that is separating you from keeping your home, get an extra job! You can do it, and it only has to be temporary until you find a higher paying job. It may suck coming home at 11pm every night, but you’ll avoid having a foreclosure on your credit record for seven years. Refinance the home. This can only be done if you have some equity in the home. Some people get into a financial bind, because they had a 5/1 adjustable rate mortgage that’s now starting to adjust upward, or they had an interest only loan that’s no longer interest-only. Some people just have very high fixed rates, because they were pressured into a raw deal. The rates are very low right now, and you can get a low-cost refinance done as long as your appraisal comes in to the value of the new mortgage you need.
There is hope, and you can get out of this mess. Foreclosure and bankruptcy should be your last options when you are in a financial bind. You will meet people that act like it’s no big deal, and it’s the easy way out. It’s not the easy way out, and people that tell you that are probably people that have never gone through a foreclosure or a bankruptcy. Do all you can to save the roof over your head. You’ll thank yourself five years from now.