Receiving a letter in the mail from your bank threatening foreclosure is a daunting experience. The threat of the house you’ve worked so hard for being taken away from you can easily reduce you into a quaking bundle of fear. It is bad to lose your home. What if you lose the house and you still owe money if the sale of the house does not cover your loan balance? What is this going to do to your credit rating?

You might feel that you cannot cope with it and ignore the letter. Unfortunately, this makes matters worse. Procrastinating will most certainly cause you to lose your home.

Don’t let your fear of foreclosure prevent you from taking action. Ask yourself: Can I stop this foreclosure and save my home?

The sooner you do something about it, the better your chance of preventing foreclosure.

So what options are available to you when you’re faced with foreclosure?

1.       Make your mortgage payment your top priority.

If you’re in serious financial trouble, prioritize your debt. This means that paying for your house is your top priority. Other debts like credit cards must be temporarily ignored (even though you’re bound to get threatening phone calls and it could affect your credit rating). If you’re in a temporary financial setback, consider selling some of your assets. Sources of cash can include any savings you have, unemployment insurance, disability insurance, or even selling your car. Do everything in your ability to pay your mortgage on time.

2.       Contact your lender the moment your financial situation changes.

Don’t procrastinate if you’re going to be late on a payment. Don’t wait for a letter from the bank. It is not in the bank’s best interests to foreclose on your house as it affects their bottom line. They are generally very willing to find alternative solutions if you are willing to play open cards with them and give them advance warning. They could agree to extend your grace period for late payments or allow you to skip some payments. They could even accept reduced payments for a certain time.

3.       Try to restructure your loan.

Try to negotiate extending the term of the loan so you have longer to pay. This will result in lower monthly payments. You could ask the bank to spread the delinquent payment over a few years or even to lower the interest rate on the loan. This will result in you paying more for your home in the long run, but you will not lose it if you can manage to make the reduced payments.

4.       Refinance your mortgage

This is a good option when your mortgage carries a high interest rate and the current interest rate is lower. You could also try to take out a different type of mortgage if possible. The drawback here is that you could be held responsible for costs such as the closing costs and other fees. You need to be extremely careful about refinancing, as there are a lot of lenders who prey on people threatened by foreclosure.  Of course you can not owe more than your house is worth with this option.  You also need to be proactive and do this before you fall behind on your payments.

5.       Give the house back to the lender.

If you see no way around it, you can offer the lender a “deed in lieu of foreclosure.” This means you sign over the house to the lender. You will not face foreclosure, but you will lose your house, so think carefully before doing this.  Often times the lender will require you to try to sell your house before they will do a Deed in Lieu.

6.       Sell your home.

This may not seem like an attractive option. However, if you have considered all the above options and still cannot afford to keep your house, find out how much you can get for your house and how quickly you can sell it. You can get a quick estimate by filling in this form. By filling in the form, you are not obligated to sell, but if you decide that selling is your best option, you have a head start. This will avoid having a foreclosure on your record.


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