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If you’re a struggling homeowner who is about to fall behind on your mortgage payments or has already fallen behind, you should take action to save your house from foreclosure. But, unfortunately, your lender does not want your home and may cooperate to retain you in the property.
For your part, you must organize yourself, take action as soon as possible, comprehend the foreclosure process, and be aware of your options. You will have a higher chance of keeping your home if you do these things.
The following are ten things you can do to try to avoid a foreclosure.
Gather all of your loan paperwork and create a case file.
The first thing you should do if you are about to miss a mortgage payment or are already behind on your expenses is getting organized. Set up a file for your home’s records and place critical documents in it.
Include copies of your loan documentation, such as the mortgage (or deed of trust) and the promissory note. Include the following as well:
- your billing statements each month
- a record of all payments made
- escrow declarations (if applicable)
- information on property taxes
- information about insurance
- every correspondence you receive from your servicer, and
- copy of any mail you sent to the servicer
Educate yourself on your legal rights.
- Once you’ve acquired your documents, read them thoroughly to know what will happen if you don’t make your payments. Will include important information in the mortgage (or deed of trust) and the promissory note, such as:
- whether you can restart the loan by making up the missed payments (state law might also provide a right to reinstate)
- the amount of the late monthly fee, as well as any extra costs that the servicer may levy if you fall behind on your payments
- In most circumstances, the lender cannot begin foreclosure proceedings until you are more than 120 days overdue in payments, according to federal law.
Sort through your financial records.
You should gather and organize your financial information in addition to the loan documentation. For example, suppose your most recent pay stubs or, if self-employed, a profit and loss statement, bank statements, federal tax return, and supporting documents for any other income you get, such as Social Security, rental income, and alimony.
It would help if you also calculated your total monthly income (including your monthly gross wages, self-employment income, overtime, unemployment income, child support, Social Security, and alimony, for example). And monthly expenses (which include your mortgage payments, credit card payments, car payments, student loan payments, food, entertainment, utilities, HOA/condo fees, and so on).
Your servicer will require this information essential to evaluating whether you are eligible for an alternative to foreclosure.
Examine your budget.
Now that you’ve determined your income and costs, it’s essential to examine your spending habits and develop a realistic budget until your financial situation improves.
Begin by looking for methods to cut your daily spending. If you buy a cup of coffee every morning or have lunch out every day, these costs can quickly add up. You also likely have several extraneous expenses, such as gym memberships, cable television, and other forms of entertainment, that you should cut back on. If you can’t get rid of certain monthly obligations, such as credit card debt, you might be able to negotiate a reduced monthly payment.
Consider different strategies to cut back on spending or altogether remove some charges so that you can make your loan payments more efficient.
Be aware of your options.
Borrowers frequently have access to permanent or temporary loss mitigation solutions that might help them avoid foreclosure. Here are only a few examples:
Loan restructure. A loan modification is a permanent alteration to the conditions of your loan. A change could, for example, lengthen the period you have to pay off the loan or lower the interest rate. In addition, the servicer can frequently add any past-due monies to the loan total with a loan modification.
Agreements for forbearance and repayment schemes If you are temporarily unable to make your monthly payments, you may be eligible for a forbearance agreement. The lender agrees to reduce or suspend payments for a set period under a forbearance agreement. You bring the loan current at the end of the forbearance period by making up the missed or reduced costs in full, either through a repayment program or a modification.
Contact your service provider.
Don’t put off seeking assistance until the last minute. If at all possible, contact your servicer as soon as you miss a payment—or suspect you will miss one—to see if you qualify for a foreclosure alternative. The sooner you address the issue, the better.
Make an appointment with a HUD-approved housing counselor.
It’s also a good idea to reach out to a free HUD-approved local counseling service. In addition, a housing consultant can aid you in figuring out how to avoid foreclosure and be aware of unique programs that can assist you.
Avoid for-profit foreclosure relief and loan modification firms.
For-profit foreclosure avoidance companies that promise to be able to secure you should avoid a loan modification, debt counseling, or another type of foreclosure relief for a charge. The majority of these companies are swindlers who offer little (if any) assistance to struggling homeowners.
Research the foreclosure laws in your state.
State regulations and timelines for foreclosure differ. It would be best if you familiarized yourself with your state’s foreclosure laws so that you can:
Do some legal study or speak with a local foreclosure lawyer to learn more about your state’s foreclosure rules.
Participate in Foreclosure Mediation if it is available in your state, county, or city.
Foreclosure mediation brings the borrower, lender (or its representative), and a neutral mediator to the table to resolve the arrears. According to one study, homeowners who participate in mediation are 1.7 times more likely than those who do not.
If everything else fails, sell the house before the foreclosure sale or deliver it to the lender.
If you’ve exhausted all possibilities and cannot reach an agreement that allows you to keep the home, you may still be able to escape foreclosure by selling it or handing it to the lender.
You are avoiding foreclosure by selling your property. You can sell your property and use the cash to pay off your mortgage loan if you have equity in it. For example, if you are underwater on your mortgage, your lender may agree to a short sale. When you sell your house, the proceeds are less than the loan sum, known as a quick sale.
Instead of foreclosure, a deed instead of foreclosure is executed. Instead of going through a foreclosure, you can use an action essential instead of foreclosure to voluntarily transfer a clear title to the lender.
Consider speaking with a lawyer if you have questions about how foreclosure works in your state and what safeguards you have against foreclosure under federal and state laws, or if you think you might wish to fight a foreclosure in court. If you can’t afford to employ a lawyer to represent you during the process, try scheduling a session with one who can advise you on what to do, explain how foreclosure works in your area, and explain your legal rights and duties.