In these tough economic times many of our clients and colleagues are facing difficult situations with their home financing. A sharp reduction in income, the adjustment of an adjustable rate mortgage or the high price of gas and groceries has resulted in a looming foreclose.
No one plans for a foreclosure, but knowing what to do and having a plan of attack, if not a strong defense, can make the difference between losing your home and damaging your credit or keeping your home and good credit in tact.
First, let's discuss what a foreclosure is: A foreclosure is the legal means that your lender can use to repossess your home. If your property is worth less than the total amount you owe on your mortgage loan, a deficiency judgment can be pursued by the lender.
If the lender obtains a deficiency judgment, you not only lose your home, but may also owe the lender the difference. Both foreclosures and deficiency judgments could seriously affect your ability to qualify for credit well into the future.
According to HUD, the ten tips below are key strategies that homeowners should implement in an attempt to avoid a foreclosure.
1. Don't Ignore the Problem.
The further behind you become, the harder it will be to reinstate your loan and the more likely that you will lose your house.
2. Contact Your Lender.
Contact your lender as soon as you realize that you have a problem. Lenders do not want your house. They have options to help borrowers through difficult financial times.
3. Open and Respond To All Mail from Your Lender.
The first notices you receive will offer good information about foreclosure prevention options that can help you weather financial problems. Later mail may include important notice of pending legal action. Your failure to open the mail will not be an excuse in foreclosure court.
4. Know Your Mortgage Rights.
Find your loan documents and read them so you know what your lender may do if you can't make your payments. Learn about the foreclosure laws and timeframes in your state (as every state is different) by contacting the State Government Housing Office.
5. Understand foreclosure prevention options:
Valuable information about foreclosure prevention (also called loss mitigation) options can be found on the internet at www.fha.gov/foreclosure/index.cfm.
6. Contact a HUD-Approved Housing Counselor.
The U.S. Department of Housing and Urban Development (HUD) funds free or very low cost housing counseling nationwide. 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.
7. Prioritize Your Spending.
After healthcare, keeping your house should be your first priority. Review your finances and see where you can cut spending in order to make your mortgage payment. Look for optional expenses-cable TV, memberships, entertainment-that you can eliminate. Delay payments on credit cards and other "unsecured" debt until you have paid your mortgage.
8. Use Your Assets.
Do you have assets: a second car, jewelry, a whole life insurance policy, that you can sell for cash to help reinstate your loan? Can anyone in your household get an extra job to bring in additional income? Even if these efforts don't significantly increase your available cash or your income, they demonstrate to your lender that you are willing to make sacrifices to keep your home.
9. Avoid Foreclosure Prevention Companies.
You don't need to pay fees for foreclosure prevention help. Use that money to pay the mortgage instead. Many for-profit companies will contact you promising to negotiate with your lender. While these may be legitimate businesses, they will charge you a hefty fee (often two or three month's mortgage payment) for information and services your lender or a HUD-approved housing counselor will provide free if you contact them.
10. Don't Lose Your House to Foreclosure Recovery Scams!
If any firm claims they can stop your foreclosure immediately if you sign a document appointing them to act on your behalf, you may well be signing over the title to your property and becoming a renter in your own home! Never sign a legal document without reading and understanding all the terms and getting professional advice from an attorney, a trusted real estate professional, or a HUD-approved housing counselor.
As you can see, it is imperative to have a plan and to be proactive. There is no time to waste. Homeowners who get ahead of the process are far more likely to save their home. Good people often lose there home simply because they were too embarrassed about their situation to ask for help.
Think of it in this manner: If you were about to lose a home as a result of a fire, you would certainly call 911 for help, right? So, why is it that when it comes to the possibility to losing a home to foreclosure, so many Americans hesitant to make the call?
Contact Jeremy today if you need Assistance at (714)580-3274 or Jeremy@LehmanHomes.net