Home ownership is a source of pride for many Americans. Changes in the real estate market and mortgage financing have made buying a home easier than it used to be, in many ways, but not necessarily easier to pay for. Home loans are secured by the property itself, meaning that if you fail to repay the borrowed money per the terms of the agreement your lender can step in and take your house.
Foreclosure is the legal means that your lender can use to repossess (take over) your home. If you are facing financial difficulty and fear that your home ownership may be put in jeopardy you don't need to just throw in the towel. There are a number of ways that you can try to keep your home and, depending on your circumstances, you might be able to work things out with the lender, limit your losses, or avoid damage to your credit score.
Below are a few alternatives to foreclosure. You'll need to talk to your lender to see if you qualify for any of these plans for avoiding foreclosure.
Special Forbearance. Your lender may be able to arrange a repayment plan based on your financial situation and may even provide for a temporary reduction or suspension of your payments. You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses. You must furnish information to your lender to show that you would be able to meet the requirements of the new payment plan.
Mortgage Modification. You may be able to refinance the debt and/or extend the term of your mortgage loan. This may help you catch up by reducing the monthly payments to a more affordable level. You may qualify if you have recovered from a financial problem and can afford the new payment amount.
Partial Claim. Your lender may be able to work with you to obtain a one-time payment from the FHA-Insurance fund to bring your mortgage current. You may qualify if you are able to begin making full mortgage payments.
Pre-foreclosure sale. This will allow you to avoid foreclosure by selling your property for an amount less than the amount necessary to pay off your mortgage loan.
Deed-in-lieu of foreclosure. As a last resort, you may be able to voluntarily "give back" your property to the lender. This won't save your house, but it is not as damaging to your credit rating as a foreclosure. You may qualify if you are in default and don't qualify for any of the other options; and your attempts at selling the house before foreclosure were unsuccessful.
How Do I Know if I Qualify for These Alternatives?
Your lender will determine if you qualify for any of the alternatives to foreclosure. A housing counseling agency can also help you determine which, if any, of these options may meet your needs and also assist you in interacting with your lender.
Still Need Help?
If you are afraid your home may end up in foreclosure it may be helpful to speak with a lawyer about your rights and options. They can inform you of your jurisdiction's protections for homeowners, discuss the merits of your options, assist in negotiations with the lender, and generally help clarify your rights and obligations. Contact a local real estate attorney to learn more about how they can help.
