Here are some helpful tips to avoid a foreclosure if you are having trouble keeping up with your mortgage payments?
If you are unable to make your mortgage payment:
1. Do NOT ignore the issue.
Do not bury your head in the sand and avoid the issue. It will NOT go away, and the further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house to a foreclosure.
2. Communicate with your lender
It is always best to communicate with your lender. The moment you know you have a problem keeping up with payments, you should contact the lender. As difficult it may be, do not avoid them, it only will get worse! Lenders really do not want your house. They have many programs and options to help borrowers through more difficult times.
3. Open the mail, then respond!
Early on you may receive notices that offer helpful information about foreclosure prevention. Some of these may just help you get through the financial challenges. If you were to avoid these, the mail will likely start to include notices of legal action, up to and including notice of trustees sale. Even if you do not open the mail the court will not excuse this behavior.
4. Know your rights
You should make every attempt to review the loan documents you signed, then read them so you have an understanding of what the lender may do if you fail to make payments. Do some homework on the foreclosure laws and timeframes in your state. Contact a real estate professional for additional guidance.
5. Contact a HUD-approved counselor.
The U.S. Department of Housing and Urban Development (HUD) funds free or least low-cost housing counseling. Housing counselors can help you understand the law and your options, organize your finances and represent you in negotiations with your lender, if you need this assistance. Find a HUD-approved housing counselor near you or call (800) 569-4287
6. Hidden assets.
Do you have assets of real value such as a car, jewelry, a life insurance policy, stocks, bonds or other items of value you can sell to help reinstate your loan? What about an extra job for additional income? These efforts demonstrate to your lender that you are willing to make sacrifices to keep your home, and they are more likely to work with you.
7. Create a spending budget
Keeping your house should be your top priority after proper healthcare fro your family. Carefully review all spending habits, then cut all unnecessary spending in order to make your mortgage payments. Which is more important, the latte at Starbucks or saving your home! If you have to hold off on credit card payments until you pay your mortgage.
8. DO NOT use a foreclosure prevention company
There is no need to pay any fees to prevent a foreclosure, and never work with anyone that tells you otherwise. You should certainly consider talking with your lender, or if you are too far behind and the options are limited, you should contact a local real estate professional for the experience, expertise and guidance and other options you may have.
9. Be aware of Foreclosure scams!
Anyone that claims they can stop your foreclosure and if you sign a document appointing them to act on your behalf, you may have just signed over the title to your home. This may put you in position of becoming a renter in your own home! DO NOT sign any legal document without understanding all the terms and getting professional advice from an attorney, or your trusted local real estate professional.
Ability to qualify for the purchase of another home sooner than going through a foreclosure. Often 3 to 5 years sooner than in a foreclosure.
You have the ability to control the sale instead of the lender.
Rest easier knowing who is actually buying your home.
Avoid the embarrassment of a foreclosure.
You can be current on your mortgage payments and still complete a short sale.
Instead of being forced from your home, you can treat it more like a traditional sale
Better preparation time for moving once the home is sold
Less likely than foreclosure to be pursued for a Deficiency Judgment
No need to check a box marked “Have you ever been through foreclosure or bankruptcy” on an application
Can I Purchase A Home After a Short Sale or Foreclosure?
Short Sale: If your payments are behind, and your lender approves a short sale, you may actually qualify to buy another home with a Fannie-Mae mortgage within two years, regardless of whether the home is your primary residence. In the case of the FHA, the wait is 3 years.
Foreclosure: You will be eligible to buy another home in 5 years, only if the home was your primary residence. If not, the wait is at least 7 years.
Investors or Non-Owner occupied owners must wait 7 years to buy again with a Fannie Mae loan.
Will A Short Sale or Foreclosure Impact My Credit?
Short Sale: A short sale is typically going to appear as a derogatory mark on your credit. This is true even though credit bureaus are not likely to display the words “short sale” on your credit report. It will generally be listed as “Paid for less than agreed” or “Settled fro less than agreed”. This simply depends on the credit bureau.
Foreclosure: After going through a foreclosure, you can expect your credit score, or FICO as it is commonly know to fall anywhere from 150 to 450 points. The reporting of a foreclosure will remain on your credit report up to 7 to 10 years.
What happens to my Credit Report after a Short Sale or Foreclosure?
Short Sale: All lenders report short sales to your credit report in different ways, in fact, some do not report them to the credit bureaus at all.
Foreclosure: After a foreclosure, the negative credit will stay on your report for 7 to 10 years. A foreclosure may also impact your ability to apply for the best jobs. You could face an application denial if you have a foreclosure on your record.
Will I have to pay a Deficiency Judgment After a Short Sale or Foreclosure?
Short Sale: Any potential deficiency judgment is typically negotiated between the seller and the bank/lender. Ultimately this is a decision to be made by the bank/lender as to whether or not to pursue you for any deficiency. In California, if the home is your primary personal residence, and the loan is also the original loan to purchase the home, the law states the lender is not entitled to pursue you for a deficiency judgment.
Foreclosure: Banks are generally not willing to negotiate deficiency judgments with you after a foreclosure. Why?, Simple, you chose not to cooperate so they see no need to allow you to walk away scott free. They will almost always pursue you for a deficiency after a foreclosure.
What are the Alternatives to a Foreclosure? -Back to Top
What is the Benefit to Avoiding a Foreclosure? -Back to Top
What are the Downsides to a Foreclosure?
Can I buy a home after a Foreclosure?
How will a Foreclosure impact my credit?
What appears on my credit after a foreclosure?
Will I have to pay a deficiency judgment after a Foreclosure?
Downside of a Foreclosure
Bigger impact on your credit
Typically 5 years or more before buying another home
No control of the sale process. Lender has total control.
Severe embarrassment
Notices posted directly on front door
No control over timeframes, buyers, or debt obligations.
Forced move from your home by Sherriff in most cases.
Little to No preparation time to move
Responsibility to pay a Deficiency Judgment to the lender
Check the box marked “Have you ever been through foreclosure or bankruptcy” on any job or credit applications.
Can I Purchase A Home After a Foreclosure?
Foreclosure: You will be eligible to buy another home in 5 years, only if the home was your primary residence. If not, the wait is at least 7 years.
Investors or Non-Owner occupied owners must wait 7 years to buy again with a Fannie Mae loan.
Will A Foreclosure Impact My Credit?
Foreclosure: After going through a foreclosure, you can expect your credit score, or FICO as it is commonly know to fall anywhere from 150 to 450 points. The reporting of a foreclosure will remain on your credit report up to 7 to 10 years.
What happens to my Credit Report after a Foreclosure?
Foreclosure: After a foreclosure, the negative credit will stay on your report for 7 to 10 years. A foreclosure may also impact your ability to apply for the best jobs. You could face an application denial if you have a foreclosure on your record.
Will I have to pay a Deficiency Judgment After a Foreclosure?
Foreclosure: Banks are generally not willing to negotiate deficiency judgments with you after a foreclosure. Why?, Simple, you chose not to cooperate so they see no need to allow you to walk away scot free. They will almost always pursue you for a deficiency after a foreclosure.
