Over the last few years we have all become all too familiar with the term foreclosure. In part the overabundance of foreclosures on the market can be blamed on the mortgage tactics that finance companies were using. It can also be blamed on the poor job market, if people are not working or are having trouble finding a new job, they may be experiencing trouble making their mortgage payments. If you find yourself in any of these situations, we are going to offer you some helpful advice on what you can do prevent losing your home to foreclosure.
The first thing you can do to avoid a foreclosure is to purchase a home that you can afford. Your monthly housing costs should be no more than 25% of your monthly income. There are many different tools available online that can help you estimate the monthly payment of a home you are thinking of purchasing. By not purchasing a home that you may later come to realize you can’t afford, you should be able to stay current on your mortgage payments and not fall behind.
If you are struggling financially, the best thing you can do is to contact your lender immediately. Informing your lender of any financial hardships you may be experiencing will let them know that you are doing your best to remain current and would like to do everything possible to keep your home. In today’s world, lenders are becoming more willing to help you stay in your home. They already have too many vacant foreclosures and are doing their best to avoid adding new ones. Once your lender is informed of your situation they may offer you the option of participating in a loan repayment program. This will allow you to divide your missed payments over a series of months until you are current. They may also offer to refinance your loan.
If your financial situation is likely going to be permanent, you should consider a loan modification. When you modify your loan lenders will likely incorporate interest rate cuts, term extension and principle reductions. Your modification may also include a combination of all these methods. The process will require you to fill out a great deal of paperwork and it may be a complicated process, but banks are willing to perform these modifications in order to allow people to stay in their homes.
If you have considered all of your options and have come to the realization that you may not be able to keep your home, you should consider a short sale. Short sales are commonly used by homeowners who are underwater in their loan. Short sales involve selling your home for less than what you still owe your mortgage lender. This process will allow you to get out of your home while limiting the amount of damage your credit will experience.