With the real estate industry continuing on a downwards spiral, more and more homeowners who took on risky adjustable rate mortgages before the bubble burst are now facing the possibility of foreclosure because they can’t make their loan payments on time.
If you’re having trouble making on-time mortgage payments and think you might be at risk of foreclosing, know that you do have some options. Simply speak with your lender about your financial dilemma and they will be happy to discuss the problem and the options available.
Lenders do not benefit from foreclosures and would rather avoid them as much as possible. They might be able to give you a forbearance or a grace period for you to make late payments. It is important that you have this conversation with your lender early on, at the earliest signs of financial difficulty, not when you find yourself already at the foreclosure stage.
The best policy is always to avoid foreclosure before it becomes a possibility. Here are a few steps that you can take to minimize your chances of having you home foreclosed.
Cut Down Your Budget
Take some time to sit down and evaluate your budget. With the failing economy adding to the pressure of the real estate bubble bursting, now more than ever people are seeing the importance of cutting back on excess spending. See which expenses you can eliminate from your budget to help you increase your income. Reevaluate the priority of your spending to see where money can be saved.
Pay on Time
When reevaluating your expenses, make sure that you place your mortgage payment at the top of the priority list. Making on-time payments should become the most important financial item on your budget.
Partial Payments
Some banks will negotiate a partial payment program with you in the event that you become unable to make a full payment. Try for this option if you feel it necessary. Banks have the right to refuse, but it doesn’t hurt to try. And even if it is not an option they offer, you can still put these payments aside and try to make full payments in the future.
Refinancing
If you have equity remaining on your house, refinancing your home can be a great way to reduce your monthly mortgage payments. Be careful when you chose to take this option, however. Work with a broker that you trust and make sure you understand all the paperwork before you sign it. If you are not careful, you could end up in a worse situation than before.
Also, be aware of scam artists. The incidence of phony counseling agencies offering mortgage renegotiation services has been rising in recent years. These companies will try to charge you an unnecessary fee for doing things that you could very well do yourself.
Loan Modifications
Go to your lender and ask if they would be willing to modify your loan agreement. Often, lenders will prefer to do a mortgage loan modification than potentially lose money on a foreclosed property.
Seek Counseling
You do not need to pay for counseling. There are non-profit organizations dedicated to helping people who find themselves at risk of foreclosing. A good place to check for such services is the National Foundation for Credit Counseling. These non-profit groups are federally supervised. If anyone comes to you offering credit counseling for a fee, make sure to say no to them.
If you’re going to seek help from a property loss mitigation specialist, make sure that they have the credentials and the track record to prove their trustworthiness.
Sell
Though you might not wish to sell your home, it might be the best option. A pre-foreclosure sale is much more desirable than the plunge your credit will take if your property is taken by the banks and sold at auction. It is important that you take action before your property is foreclosed. Make sure that you have a place set aside where you can live for a while before you’re back on your feet, which, with your credit still intact, should be easier than the alternative.