Foreclosure is the action of repossessing a home if the owner fails to keep up with their mortgage payments. The reasons homeowners go into foreclosure is usually unpredictable, but can often result from being laid-off, the inability to handle mounting debt, divorce, or even transferring jobs to another state. When foreclosure happens, the owner not only loses their home, but they also would owe their lender more money, and it could seriously damage their credit. It’s safe to say that foreclosures are not fun, so here are 5 tips on how to avoid them.
1. Identify the Problem and Contact Your Lender
They say the first step in solving an issue is admitting their is an issue. Do not avoid the problem and hope it goes away. Your lender does not want to take your house, they are on your side. Make sure you open and respond to any mail they send you and give them a call to discuss the different options they might have to help you through any financial difficulties.
2. Understand Foreclosure Laws
Each state has a different set of laws and time frames regarding foreclosures, so contact your State’s Government Housing Office to get a thorough understanding. Also be sure to read your own loan documents thoroughly to learn what your lender may do if your payments fall behind.
3. Contact a Housing Counselor
The U.S. Department of Housing and Urban Development (HUD) offers affordable (sometimes free) nationwide counseling. These counselors can be used to help you get a better grasp on foreclosure laws, help you understand your options, and can even offer financial organization. Find a HUD-approved housing counselor near you or call (800) 569-4287 or TTY (800) 877-8339.
4. Budgets & Assets
Having a roof over your head needs to be your number one priority. In order to make payments on time, come up with a financial plan by cutting your spending. Start thinking about what assets you have that you could sell to help reinstate your loan. Whatever efforts you make, whether they increase your income or not, will not go unnoticed. Your lender will see that you are making sacrifices in order to keep your home.
5. Avoid Scams & Prevention Companies
Don’t pay extra expensive fees for a prevention company when you could be using that money to pay your mortgage. Whether it is a legitimate company or not, they will drain your wallet and provide information that a HUD counselor will give you for free. Also avoid any firms that offer immediate help to stop foreclosure by signing a document. Get professional advice from an attorney, real estate professional, or a HUD counselor.