Be proactive. If you have fallen behind on or expect to fall behind in your mortgage payments, you should definitely begin to consider options to save your home from foreclosure.
You should also know that your lender wants to keep you in your home. You need to be organized, take swift action and understand all options to keep your home as well as learn the foreclosure process. You will not only have a better chance of avoiding foreclosure, you will feel better about knowing the process. The following are some options to consider when you are no longer able to make your mortgage payments, based on individual circumstances.
What Can I Do to Avoid Foreclosure? Get organized. Gather your documents such as monthly statements, a record of payments made, escrow statements, property tax and insurance information ? any correspondence from your lender and loan servicer, and copies of letters from each.
Review your budget. Knowing precisely where you stand financially, you can clearly communicate this information to your lender or loan servicer.
Learn about your mortgage rights. What happens when you don?t make your mortgage payments? Can the loan be reinstated by catching up on the delinquent amount? Learn what may be charged by the lender or loan servicer when you fall behind on your payments.
Become familiar with your financing options. Choices such as loan modifications, forbearance agreements and loan refinancing may be available to you depending on your circumstances. Call our office if you need clarification on what?s best for you.
Alternative Financing Options
Loan modification A long-term change to existing loan terms, such as a reduction of the interest rate, which then lowers the monthly payment to make the loan more affordable.
Forbearance Agreement With a forbearance agreement, your mortgage servicer agrees to reduce or suspend your monthly mortgage payments for a set period of time. At the end of the forbearance, it is expected that you resume the full mortgage payment plus pay an additional amount to get current on missed payments, including principal, interest, taxes, and insurance. A forbearance period may be extended if the hardship is not within the time period. In addition, foreclosure will not occur during a forbearance period.
Loan Refinance Is a loan that is structured based on the balance you currently have at a current interest rate. This type of loan often makes your payments significantly lower. Closing costs and appraisals may be waived depending on your loan servicer.
Programs That Modify Your Loan to Reduce Your Monthly Payment
- Foreclosure mediation Check with your local jurisdiction to find out if they have any foreclosure mediation programs that you can participate in with your lender. Hiring an experienced real estate attorney may help as well as they can facilitate your participation in this program. Depending on your income, you may be able to qualify for legal aide assistance in your area with these programs as well.
- Home Affordable Modification Program Assists borrowers by modifying their first lien mortgages so that the monthly payments are lower and more affordable. You can qualify for a HAMP modification if you?ve lost your job, but the program does require a steady monthly income in the household.
- Home Affordable Unemployment Program Is part of the federal government?s Making Home Affordable initiative. This program is only available for first mortgages and the home must be used as your primary residence. If you are unemployed and meet certain criteria, UP may reduce your mortgage payments or eliminate them altogether for a period of time.
- FHA Special Forbearance for Unemployed Homeowners If you have an FHA-insured loan and you lose your job, you may be eligible for a forbearance period. This program was created to give homeowners a chance to stay in their homes until they obtain employment and can begin making regular mortgage payments again.
- Hardest Hit Fund You may be eligible to receive mortgage payment assistance from a Hardest Hit Fund program in your state, if you lost your job through no fault of your own. This government program was designed to provide financial assistance to individuals in states where home prices declined drastically. These states also experienced high unemployment rates as a result of the economic crisis. Several of these programs still have funding and have until the end of 2017 to allocate these funds.
Some Last Ideas
Learn about the foreclosure laws in your state. What is the time frame in which you have to negotiate a deal with the lender prior to foreclosure? Investigate your rights and protections during the foreclosure process.
Selling your home to avoid a foreclosure.?If you have equity in the home, you can sell it and use the proceeds to pay off the mortgage.
Short Sale. If you owe more than your home is worth, your lender may allow you to complete a short sale. A short sale is when?you sell your home, but the proceeds of the sale are less than the balance owed on the mortgage.
Deed in lieu of foreclosure.?With a deed in lieu of foreclosure, you voluntarily convey clear title to the property over to the lender in exchange for a discharge of the debt.