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Foreclosures
What to Do If It Happens to You
By Shel Franco
- Obtain a "deed in lieu" of foreclosure. A "deed in lieu" allows the borrower to offer the title or deed of the property back to the mortgage holder in order to prevent a foreclosure on the home. You are simply giving the property back to the lender in order to avoid foreclosure.
- Sell your home. Like a deed in lieu, selling your home may not be ideal, but it is another way to avoid foreclosure proceedings on your house and pay back your lender.
- Refinance the loan. It may be possible to refinance your mortgage for a lower interest rate and/or lower monthly payment (this is much different than refinancing to take cash out to pay off credit cards). However, if you already have had late payments on your mortgage, the interest rate offered to you may be too high to lower your monthly payment. But it is worth calling your lender to see what your options are.
"If you are looking for assistance in negotiating a forbearance, deed in lieu or loan modification with your lender, contact a reputable foreclosure assistance organization that has a good rating with the BBB," Housser says. "If a solution is possible, a good foreclosure assistance organization will be able to use its foreclosure expertise and relationships with lenders to come up with a solution that works for both you and your lender."
When considering the purchase of a home, make sure you have sufficient funds to qualify for a good loan and have three to six months' worth of mortgage payments in the bank. "Do a good budgeting exercise up front, watch out for adjustable rate mortgages and leave yourself some breathing room," Charney says. And take a good look at yur lifestyle to make sure you aren't living beyond your means.