Sure, you didn’t think when you signed your mortgage papers that you’d ever be in the position where you might lose your home. But, sometimes life throws curves that we don’t anticipate and we find ourselves swamped with unexpected medical bills, out of a job, or faced with the income shattering consequences of divorce. There’s usually very little standing between the average homeowner and their worst nightmare – foreclosure. There are however, several things that you can do to avoid losing your home. And with planning and perseverance, you should be able to make it through even the toughest financial crisis and still keep your home.
For the most part, your mortgage lender will probably be willing to work with you. After all, they’d rather have your money than an empty house that will sit on the market for months costing them money instead of making money for them. Most lenders understand that even the best customers can fall behind and have devised ways to help you get back on track. So, first and foremost, if you are behind on your mortgage payments, communicate with your lender. Don’t make the mistake that so many people make and avoid making the call. Tell your lender up front, and as soon as possible, what is going on so that they can help you.
Most lenders have relatively similar programs to help you avoid foreclosure. The first option is usually a simple repayment plan. The lender will generally allow you to spread the repayment of your missed payments over the next few months. You will need to agree to a definite payment plan and there are usually some small fees involved, but this is likely the best option for most people who are capable of catching up and are just a payment or two behind.
Some lenders will allow you to modify your loan if you fall behind. The most common way to do this is to roll the missed payments back into the loan balance and reamortizing the loan. This gets you back on track right away and allows you to pick up where you left off. There’s also the option of the short refinance or the hard money refinance. The short refinance will allow you to refinance your loan while the lender forgives some of your mortgage arrears. The hard money loan generally involves receiving a high interest loan from a private lender that will see you through until you sell your home. The hard money option is usually not for those who are going to keep the property.
Finally, if you’re sure that you will not be able to either catch up on your mortgage arrearages or you are not certain that you are going to be able to stay current if your mortgage company helps you out, you may want to consider discussing a short sale with your mortgage lender. In a short sale, the lender approves the sale of your home for less than the outstanding loan amount. The mortgage company will keep any proceeds from the sale and will forgive any remaining balance. In this option, you will receive no profits from the sale of your house but you will also not owe the lender anything once the process has been completed.
Your mortgage company has many options designed to help you avoid foreclosure, whether you intend to keep your home or not. The key is to act quickly and discuss your financial situation honestly with your lender as soon as you see that paying your mortgage has become a problem – preferably before you miss your first payment. Generally, the earlier you begin proactive discussions with your lender, the better the outcome.