When the foreclosure notice arrives in the mail, many homeowners simply give up. After all, when you are behind on your mortgage payments, there is no other option, right? The truth is that there are options other than simply giving up and letting the foreclosure happen.
If you have not yet received the foreclosure notice, but know that you are going to be falling behind, call your lender. Make an effort first to work things out. Remember, your lender really doesn’t want your home. If extenuating circumstances, such as an unexpected job loss, have happened, your lender will often work with you. Temporarily reduced payments, rolling what you owe back into the loan, or a short-term restructured payment plan can help you to get current with your loan. However, if you wait until you are very far behind, your lender is not going to be as willing to work with you. Keep in mind that once you have been offered a repayment option, you need to be able to make the payments.
You can also work with non-profit foreclosure help organizations. They will help you budget and deal with any other credit problems that are making paying your loan difficult. Use caution when choosing one of these companies, as many claim consumer help companies are actually out to make a profit on your circumstances through fees and charges. Check with the National Foundation for Credit Counseling or the Housing and Urban Development Department to find good credit counseling services.
If you simply cannot afford your home, you have options outside of foreclosure as well. Consider selling the house quickly. Discount the price enough that it will sell quickly, but you can still pay back what you owe after deducting your real estate agent’s commissions. If this is not possible because you owe too much, ask your lender if you can simply hand over the deed in lieu of foreclosure. This saves them money, because foreclosure is expensive, so they may accept. If they don’t, try to negotiate a short sale, which is a scenario where you sell the home for less than you owe in order to give the bank something and avoid foreclosure. Make sure the lender agrees to the short sale before you start the process, but keep in mind that short sales do affect your credit score.
If all else fails and you have to go through the foreclosure process, do not panic. Yes, foreclosure is painful and damages your credit score, but it is not a permanent blight. You can get back on your feet and back into a home much quicker than you might think if you learn to budget and stay out of credit card debt after the foreclosure is over.
