Not being able to afford monthly mortgage payments is the stuff of nightmares. As the phone calls and letters threatening foreclosure continue to mount, the very thought of losing your home can be so stressful that it causes physical illness and strained relationships. If you are facing foreclosure, the first thing you need to know is that you do have options.
The one thing you should absolutely not do is ignore the problem in the hope that a solution will appear on your doorstep. It will not. However, if you are willing to put some effort into a resolution, there are ways to address the foreclosure issue so you can get on with your life. Below are your five primary options.
1. Contact Your Lender
The very first thing any homeowner should do when experiencing trouble making mortgage payments is to contact the lender. Though it may be contrary to what you have always heard, mortgage lenders do not relish the foreclosure process. Foreclosure is just as stressful for them as it is for you, and they often end up losing money in the end. They would prefer to help find a solution rather than take you through foreclosure.
Contact your lender to see if you can work out some sort of arrangement whereby you pay less every month, or they agree to accept no payment for a few months while you get back on your feet. You may be surprised how willing your lender is to work with you.
2. Loan Modification
The government’s Home Affordable Modification Program (HAMP) is open to struggling homeowners who meet minimum qualifications. The program makes low-cost loans available through Freddie Mae and Freddie Mac as a means of refinancing. The program can take up to a year to complete, so get started as soon as you realize your mortgage is in trouble.
3. Ask for a Short Sale
A short sale is essentially selling your home on the retail market for less than it’s worth. Your bank will have to approve a short sale, as they will be taking a loss on the mortgage. This option will also negatively impact your credit rating for a time. Nevertheless, it is far better than foreclosure.
4. Deed In Lieu Of Foreclosure
If foreclosure equals the death sentence to your credit for 7 to 10 years, a deed in lieu of foreclosure is only one step above. With this option, you are essentially handing the deed to your home over to the bank to avoid formal foreclosure proceedings. You will save yourself the stress of going through foreclosure, but your credit rating will suffer the same amount of damage. You will also be left without your home.
5. Declare Bankruptcy
Declaring bankruptcy can stop foreclosure proceedings through an automatic stay. Though such a solution is not permanent, it does give you an opportunity to step back and decide what to do next. Chapter 13 bankruptcy is a reorganization program, as opposed to the liquidation of Chapter 7, and it will allow you to keep your house while reorganizing all of your debts into a more manageable package. For the record, most bankruptcy courts will not grant Chapter 7 liquidation unless there is absolutely no way you can successfully accomplish reorganization.
Having to deal with a potential foreclosure is never easy to go through. Nonetheless, with the right information and the help of an attorney, when necessary, you can get through it. Feel free to contact our law offices to learn more about how we can help.