How to Avoid Foreclosure

If you have missed a house payment and your financial future looks bleak, now is not the time to stick your head in the sand and wait for the situation to go away. It will probably not. Besides, if handled promptly and intelligently, you may have options for avoiding foreclosure.

Cash flow and foreclosure prevention
Take a hard look at your budget. Is there any "fluff" that you can eliminate?

• Consider taking a job or a second job, even if they do not pay that well, until you can find something better.
• Pay all of your other bills last. Having a foreclosure on your credit report will have a much larger impact on your credit report that a few late payments on other bills.
• Consider asking friends or family members for a loan.

Contact your lender
If you have missed a house payment, do not wait for your lender to contact you. Your lender might not call you for several months, at which point you will have fewer options. Call your lender as soon as possible to see if you can come to a mutually satisfying arrangement.

You might be able to agree to a temporary respite in payments, such as skipping one or more payments or reduced payments for a given period of time.

If you have a large mortgage and your home is likely to sell for less than your loan balance, you might be able to re-negotiate the terms of your mortgage for the entire length of your loan.

Remember, it costs loan companies big bucks to foreclose on a property. The company may be willing to work with you because it makes financial sense over the long term for them to do this.

Selling your home
Selling your home is another, less preferable option. If you decide to sell your home, make the decision early so that you will have adequate time to sell the house, find another place to live, and move. Also, contact your lender and ask if the company will delay the foreclosure proceedings to give you more time to sell. Remind your lender that you are doing this so that you can pay off your loan. Make sure that you set a reasonable selling price on your home so that it will sell quickly.

Deed to lender
You should only transfer ownership of your property to your lender as a last resort. For one thing, you will not get anything at all in terms of money if you use this foreclosure prevention method, even if you have built up equity in your home. Secondly, deed to lender transactions show as a negative on your credit report, although they are not as bad a negative as foreclosures

Foreclosure prevention tips

• Confirm your conversations with your lender in writing.
• Consult a real estate attorney. Paying for a few hours of advice now might be less expensive than finding out you have made a bad deal later.
• Use a reputable real estate agent.
• Always get agreements in writing. Verbals do not count.