Over the last few years, as real estate values have plummeted and the overall economy has slipped into recession, foreclosures have been on the rise. Perhaps you or someone you know is facing the imminent threat of losing their home. Don't despair - in this economy every income class has been affected. These are good people; they aren't deadbeats or irresponsible borrowers. They simply got caught in a financial storm that has become impossible to escape.
So are there ways to avoid a foreclosure and escape becoming a casualty of the current economic Tsunami? Yes! Let's take a look at five ways to avoid a foreclosure:
The best way to avoid foreclosure is to take control of your financial destiny before a problem presents itself. For instance, if you know that you have one of the tens of thousands of loans with adjustable rate mortgages getting ready to reset to a higher rate, act now to refinance the loan at a lower fixed rate. Often your current lender will be willing to refinance your current mortgage quickly and easily, but be sure to shop rates by exploring local lenders and banks. You can view comprehensive comparisons of many national lenders at Trulia Mortgage.
If your current lender is unwilling to refinance the loan and other lenders have turned you down, you may wish to consider the HOPE program. This is a government sponsored program for borrowers at risk of default and foreclosure. The program provides new 30-year fixed rate mortgages that are insured by the Federal Housing Administration (FHA). But be aware that these loans come at prevailing interest rates and borrowers must agree to share in any equity appreciation when the home is sold or refinanced at a later date.
If your financial situation has changed, perhaps you lost your job or had a medical emergency and you cannot make your payment, you may want to request forbearance from your lender. Forbearance simply means that the lender allows you to skip one or more payments while you get your financial house in order again. This doesn't mean they give you a free ride however. Missed payments are generally tacked back on to the end of the loan and the interest on the note continues to accrue during the deferment.
One key item to remember when facing foreclosure is that your bank or lender does not want your home back. Because of this, if you have any reasonable chance of repaying the debt, they will often work with you to create a plan that will meet your financial needs. One way to kick start this process is to request a loan modification. A loan modification means that your lender agrees to change the terms of your current mortgage to fit your current financial situation. Often this can include a reduction in the interest rate, extension of the term of the note, or even a principle balance adjustment.
It's likely that if you are facing foreclosure you have considered selling your home. The problem comes if you owe more than the home is worth. To deal with this challenge, many homeowners request a short sale from their lender. A short sale means that the lender agrees to accept less than what is owed on the home in exchange for not being forced to foreclose on the property. However, be aware that the timeline for accepting an offer subject to a short sale can last from a few weeks to a few months as lenders are swamped with similar requests from thousands of borrowers nationwide.
The best advice, as hard as it might be to follow, is to remain calm and unemotional when talking with your lender to. Remember the person you are talking to isn't the bank, they are an employee of the bank. To achieve the best results, write down the points you want to cover during each call, take notes of the conversation, and always record the date and time you called. In many cases your hard work will save you from being a foreclosure casualty.
If you have found yourself behind on mortgage payments recently, chances are you have been anxiously debating your next step. Do you let the bank take the home back, hand them the keys, and ride off into the sunset, or do you think more creatively and consider ...