Prevent Foreclosure and Keep Your Home
Knowing how to prevent foreclosure can be essential to maintaining a strong financial situation. Foreclosure can be a frightening, expensive, and time-consuming process capable of ruining your credit and disrupting your family life for years to come. Learn how to prevent foreclosure and keep your home with these steps:
How to Prevent Foreclosure
Prepare. Experts advise setting aside six to twelve months’ income to use in the event of an emergency. Unfortunately, for those facing tough financial setbacks such as job loss, illness, or divorce, making the minimum monthly payments might be too much to handle. You might raise money by clearing out your attic, basement or garage or working a little overtime in order to set aside enough for one additional mortgage payment. This allows you to reduce the risk of making late payments and falling into the spiral of default should an emergency arise.
Speak to the Servicer. Should you encounter a financial problem or get behind on payments, don’t delay – speak to your servicer immediately. Explain the situation and how long you expect it to take before you are able to get back on your feet. Ask for a hardship forbearance or alternative payment plans such as interest-only payments. The mortgage servicer is often able to provide short-term relief for one to six months by letting you skip a payment (it will be added to the end of the loan term) or allowing you to make reduced “interest-only” payments to help prevent foreclosure.
Speak to the Lender. If you are still experiencing economic difficulties at the end of the forbearance period, ask your servicer to provide the contact information to your mortgage lender. Contact the lender or lien holder to request loan modifications that may allow you to keep your home. Common examples include changes to the terms and conditions of the loan, including mortgage duration, interest rates, or both. In many instances, the ability to restructure a loan or refinance will allow homeowners to make lower monthly payments and remain in their homes to prevent foreclosure or bankruptcy.
Contact Credit Counselors. Educate yourself to avoid foreclosure fraud and scammers. Mortgage lenders and servicers can only approve repayment plans if you are able to meet your financial obligations. If your debt is out of control, then schedule an appointment to speak with a credit counselor. They will be able to help you create a realistic budget and apply to any local or community grants, loans, or other special financial programs you may be eligible for in the area. They will also help you negotiate other payment options including credit cards, car loans, and other debt repayment options in order to allow you to gain control of your finances and prevent foreclosure.