Owning a home and having a mortgage is a huge responsibility. Qualifying for a loan is only the first step in becoming a full-fledged homeowner. You also need to make monthly mortgage payments and keep them up until the loan is paid in full. Even if you have an adjustable rate mortgage (ARM) and the interest rate sky rockets OR you lose your job or have a medical emergency that wipes out your finances, you're still responsible for paying your mortgage each month.
Unfortunately some people can't recover from an interest rate jump, job loss, or medical emergency, and they start defaulting on their mortgage payments. If you fail to pay your home loan, you're heading down the road to trouble.
If you're already heading down that road and are trying to figure out what options you have to save your home, we have the information you need. Read through the following foreclosure options guide and figure out what you can do to keep your home from the bank.
8 Foreclosure Options to Help Save Your House
Refinance Your Existing Home Loan
Before you're faced with a foreclosure, you can try to refinance your mortgage. If you have an ARM (adjustable rate mortgage) and the interest rate just skyrocketed, refinancing for a fixed rate loan can help you get a handle on your monthly mortgage payments. As far as foreclosure options go, refinancing is one of the first things you want to do if you just can't keep up with your payments. However, home refinancing is only a viable option if you are not too far behind on your payments and you have built up equity in your home. If you do have late payments, the lender will probably refinance your loan and include the total amount of your late payments in the loan as well. This will cover all your past unpaid payments and get you into a more manageable home loan.
File for Forbearance
Forbearance is a special instance where your lender works with you to arrange a repayment plan that is manageable based on your existing financial hardship. Typically when you lose your job or had an unexpected medical emergency that has significantly lessened your income, forbearance is one foreclosure option you might qualify for. However with forbearance, you are still responsible for paying back the loan based on the new terms set by your lender; so you must show proof that payments can be made before your lender will qualify you for forbearance.
Request Modifications to Your Mortgage
Mortgage refinancing is considered a mortgage modification in terms of foreclosure options; however there are additional modifications you can make to your home loan. You can also attempt to extend the terms of your loan. Both cases allow you to alter the monthly amount of your mortgage payments and can ease your financial burden to avoid foreclosure.
File a Partial Claim with the U.S. Department of Housing and Urban Development (HUD)
The Department of Housing and Urban Development was developed in 1965 to help all Americans establish a decent living environment. As far as foreclosure options go, facing possible foreclosure is definitely a situation where HUD can assist. Your lender can help you file with the Department of Housing and Urban Development to obtain an interest-free loan to bring your mortgage payments current. However, there are some qualifications you must meet first.
In order to qualify for such a loan, 1) your mortgage loan must be between 4 to 12 months delinquent, 2) you can't already be in foreclosure, and 3) you must be able to resume full mortgage payments as a result of the interest-free loan. For details visit the
U.S. Department of Housing and Urban Development website.
Sell Your Home Before You Face Foreclosure
If you just can't afford your mortgage payments and other foreclosure options can't help you, selling your home is one way to resolve the issue prior to foreclosure. If you can find a buyer for your home before your lender forecloses on it, you can avoid having a foreclosure mark on your credit record. Unfortunately the end result is you lose your home, but at least your finances are still intact and it won't be as difficult to qualify for a new home loan later down the line.
File for Personal Bankruptcy
Filing for bankruptcy is one foreclosure option; however it does affect your credit and financial standings. Before you even think about filing for bankruptcy to avoid foreclosure, you need to know what type of bankruptcy to file and how it will help and affect you. It's true that bankruptcy does protect your home from being foreclosed on, but there's a lot involved with filing bankruptcy. Here are some bankruptcy chapters to consider:
Chapter 7 Bankruptcy - this type of bankruptcy freezes your assets. You can't buy anything but your lenders can't take your home. Instead your assets are liquidated to pay off what you owe (items such as your car, boat, furniture, jewelry, etc.). You do end up losing a significant amount of your property, but at least your home is protected.
Chapter 13 Bankruptcy - this type of bankruptcy does NOT freeze your assets. Instead, the total amount of what you owe is discounted for pennies on the dollar and a payment schedule is established. As long as you stay on top of all your payments, the bank won't go after your home and other property.
NOTE: if you're considering bankruptcy as an option to avoid bankruptcy, consult a bankruptcy lawyer for assistance and additional details.
Give Back Your Home to the Lender
Also referred to as deed in lieu of foreclosure, you can actually give your home back to the lender. Although you do end up losing your home, it doesn't leave as harsh a mark on your credit. This is a last-chance option when all other foreclosure options aren't available. You need to talk with your lender if this is the option you're considering.
Let the Foreclosure Commence
Although the last of your options, it's not the option you want to settle on. There is no benefit to allowing your lender to foreclose on your home. Do everything you can to try and settle your delinquent payments prior to foreclosure notice.
Foreclosure is a terrible thing. You want to avoid it as much as possible. If you're falling behind on your mortgage payments, act now by reviewing your options and taking the first steps toward saving your home.