Steps of Foreclosure

Avoiding Foreclosure

The first and most important step you need to take in the avoiding foreclosure process is to communicate with your lender. Most people are scared and embarrassed to the point where they ignore phone calls and letters from their lenders. If you are trying to avoid foreclosure and hang on to your house you need to work with your lender. Contrary to popular belief, lenders to not want to foreclosure on your house. The foreclosure process is a very long, expensive process.

If you are several months behind on your mortgage and the situation is a temporary one, there are solutions available to help you. If your loan is Federal Housing Authority (FHA) approved, you can get in touch with an FHA housing counselor who will walk you through possible solutions for your situation. These counselors will even negotiate with the lender for you and will help you work on a monthly budget plan.

Another solution is a forbearance which is when your lender agrees to suspend your payments temporarily. In most cases you will be required to pay a reinstatement or in other words the entire outstanding amount in one lump sum. If you have a large amount of money you are expecting, this might be a good option for avoiding foreclosure.

A mortgage modification is when your lender agrees to change the terms of your mortgage, such as a lower interest rate, which will make the monthly payments more affordable for you. You will be required to provide a financial history which details your income and monthly expenses. If you can show the lender that you can comfortably pay a lower monthly payment they will likely grant the mortgage modification.

If you can't keep your home, try selling it. In some cases the lender will suspend your loan payments while you sell your house. The lender could potentially accept less than the loan amount that is owned on the house if you sell it quickly. Or as a final option you could simply hand your property back to your lender. Be careful though because if your lender accepts less than the loan amount or you simple give your house back to the bank and they sell it for less than the loan amount, you could liable for the difference between the selling price and the original loan amount. This is known as a deficiency judgment where the lender can still collect on the unpaid balance of the original loan.