5 Options to Avoiding Foreclosure

5 Options to Avoiding Foreclosure

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If you’re faced with foreclosure, you may still have some options available to help delay or avoid that fate. Your chances of keeping the home may still be good if you have a job and the means to pay down your debt. However, without these two attributes, the likelihood of staying in your home is small.

What are your options? You may have as many as five of these, although some are not as attractive as others:

1. Negotiate with your lender — The party with the most to lose in a foreclosure, besides you, is your lender. Foreclosure is expensive and may cost your banker tens of thousands of dollars in lost payments, a reduced home value and fees if they were to take your home back. Work with your lender to see if you can receive partial forgiveness, a lower rate or a new mortgage with the unpaid debt added to the end of your loan.

2. Seek government assistance — The federal government’s Making Home Affordable program at www.makinghomeaffordable,gov is still in operation and may be a way for you to lower your monthly mortgage payments to give you a better chance of repaying your mortgage. Even if you are unemployed or need help with a second mortgage or have been hit hard by falling home values, you may still qualify for assistance.

3. Consider bankruptcy protection — If you are overwhelmed by debt, then the only way you may be able to keep your home is to file for personal bankruptcy. You’ll still be responsible for making mortgage payments, however you may be able to get out from underneath credit card and other unsecured debt. Talk with a bankruptcy attorney about your options under Chapter 13 of the U.S. bankruptcy code.

4. Sell your home — Keeping your home may be impossible, but selling it may relieve you of a burden you simply can no longer bear. In a down market, this can be challenging, but a short sale can work if you have a motivated buyer and a banker interested in making a deal. Short sales are difficult to pull off — your banker is under no obligation to take a loss and he may come after you for the deficiency, if allowed by state law.

5. Give it to your lender — If foreclosure seems likely, you can offer to turn the deed over to your lender and walk away. You’ll want to work with an attorney to protect your rights and you should know that your credit will be affected. But, dragging things out can keep you from moving on with your life, therefore consider handing the deed and keys to your home to your banker.

Taking action as soon as you fall behind on your mortgage is the best approach to keeping a problem from getting out of hand. Your options are better when your problems are still manageable. However, if you fall behind by several months, a window for loan modifying or forbearance may close, costing you your credit, your home and your peace of mind.

See AlsoSayLending: Home Refinancing Guide

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Categories: Home Financing

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Auto Trends Magazine", an online publication. Matt covers campus, consumer, business and financial topics on various websites and weblogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".