Foreclosure & Alternatives Law
10 Tips for Avoiding Foreclosure
In this article
- 1. Take Action Quickly To Protect Yourself
- 2. Be Honest With Your Lender
- 3. Try To Get a Loan Modification
- 4. Understand the Foreclosure Process
- 5. Talk to a Housing Counselor
- 6. Cut Your Spending and Find Other Sources of Money
- 7. Consider Chapter 13 Bankruptcy
- 8. Avoid Using Foreclosure Prevention Companies
- 9. Watch Out for Foreclosure Scams
- 10. Think About Selling Your Home
Keeping up with mortgage payments is hard if you face a job loss or reduced hours. Even without an income, the mortgage bill comes due every month.
Here are several suggestions you can use to reduce the chance of foreclosure and get help refinancing your interest rates to an amount you can afford. If you need help with foreclosure, talk to an experienced foreclosure attorney for legal advice.
One mistake many homeowners make is letting money problems get out of control before acting. Don’t ignore the mortgage company. The problem won’t go away.
Your first late fees may come 10-15 days after your first missed payment. You need to contact your lender immediately, even if you are embarrassed or nervous. In most cases, a lender will understand and work with you on a loan modification.
In most cases, your lender would prefer to get your payments instead of having to sell your house and lose out on future interest.
Mortgage lenders have options to help borrowers like you stay in your home and avoid foreclosure.
A mortgage loan modification can reduce your monthly mortgage payments, get you a lower interest rate, or extend your mortgage to reduce your monthly bills. Contact your mortgage company and ask about refinancing or a loan modification.
Your lender can help with other options, like mortgage reinstatement, forbearance, or a repayment plan, so you can get back on track. A forbearance period is a way to pause or lower payments for a limited time because of short-term problems.
If you can’t find a solution, see if your state has a foreclosure mediation program to help homeowners and lenders reach a fair agreement.
There are many points during the foreclosure process where you can stop the foreclosure and catch up on payments. But foreclosure is different in every state.
Most loan servicers start foreclosure about 3 to 6 months after the first missed payment. After 30 days, you are in default. If you don’t talk to your lender, the foreclosure may happen much faster.
There are different types of foreclosure:
- Judicial foreclosure
- Power of sale
- Strict foreclosure
Different state laws allow for different types of foreclosure sales. They have different timelines and notice requirements.
The U.S. Department of Housing and Urban Development (HUD) offers free or low-cost financial and housing counseling for advice about mortgage rights, foreclosure avoidance, defaults, and financial hardship.
A housing counseling agency can:
- Talk you through all your options
- Help you understand your finances and get them in order
- Represent homeowners in negotiations with the mortgage company
You can contact a HUD-approved housing counselor by calling 800-569-4287.
Cutting spending means you will have more money to put toward your mortgage payments. It can mean significant lifestyle changes. Everyone in the family must get on the same page.
Look at your debt and interest rates. One strategy is to pay off higher-interest debt first. Make at least your minimum monthly payments with the extra money going toward credit cards or loans with the highest interest rate.
You may also have assets you can sell to pay off your mortgage debt, like:
- Extra cars, motorcycles, boats, or other “toys”
- Jewelry, art, and collectibles
- Clothing and shoes
- Life insurance policies
An extra job can also bring in helpful income and take up time you may have used to spend money. Do you have a spare room in your house? You could take on a renter. You may not want to, but it’s better than losing your home.
This is not the best option for everyone facing foreclosure. However, a Chapter 13 bankruptcy plan can reorganize and consolidate your debts into an affordable monthly payment. This can allow you to catch up on late mortgage payments. It also stops lenders from repossessions, including foreclosure.
Some foreclosure prevention companies offer to help in exchange for a fee. These are similar to some debt relief companies that offer to consolidate your debt. They usually ask for a high up-front fee and fail to do much to lower your mortgage payments. These companies may not be doing anything illegal, but they charge high prices for information you can usually get for free.
Your home may still be worth a lot of money, and people are looking to take advantage of this. Promises that sound too good to be true probably are.
Some scams offer to stop your foreclosure immediately. They may be trying to steal your home. They can try to get you to sign a document that gives the house to them, and your payments will be rent payments to the scammers. If you’re unsure about a foreclosure offer, contact a HUD counselor or a foreclosure lawyer for advice.
If you can’t get ahead on your debt and can’t negotiate a deal with the lender, selling the home before it goes into foreclosure might be best. This is better for your credit score when you are eventually ready to become a homeowner again. A pre-foreclosure sale may help you save some of the equity you put into the house.
Another option is a deed-in-lieu of foreclosure. You can offer to return the property to the lender to avoid foreclosure. A waiver of the deficiency can help avoid any liability on the remaining mortgage so you can get back on your feet more easily. Lenders may even offer incentives to pay for relocation.
Your options may differ depending on your state laws. For any questions about your legal options to avoid foreclosure, ask an experienced foreclosure law attorney for advice.