How to Protect your Home from Repossession
Owning your own home gives you a sense of freedom and stability. It is yours, and you can decorate it any way you wish. You can form relationships within the community, and you can build lasting memories with your family.
Unfortunately, dreams can shatter before you know it. You struggle with paying the bills each month, and suddenly, you can no longer make the mortgage payments. The mortgage company sends you letters and calls you asking for your payment. You finally come to the shocking realization that foreclosure is on the horizon.
By the time foreclosure does occur, you have accepted it as reality. This scenario has been building up for months, and now, it is finally here. You might have had medical expenses, or you might have lost your job. Your interest rate could have increased with your adjustable-rate mortgage. Whatever the reasons, your payments are just much higher than your budget.
Federal mortgage rules give you a few months to catch up on your payments before the bank can begin the foreclosure process. Foreclosure is not a quick process; it takes time. Therefore, you have time to regain control. You can form a plan and hopefully come up with a solution. You will have time to examine the choices that you have. Do not just ignore the problem; it will not go away. Instead try to come up with a plan to get back on track.
Uncertainty can be a Problem
Foreclosure can cost you a significant amount of money if you refuse to face the issue. You are going to lose your home eventually, so you need to take action to see what options are available. If you are going to lose your home anyway, any payments you make will be useless.
You may gather enough money to make one payment; however, you will still miss future payments. You could not afford the payment to begin with, so you with wind up in foreclosure eventually anyway. If you want to avoid foreclosure, you must get current on your mortgage or file Chapter 13 Bankruptcy.
You should act before the lender acts. If you think you are going to start being behind on your mortgage payments, start trying to find a solution. You will discover how in the next chapter.
Help Can Be Found
Your mortgage will probably be the largest bill you will pay each month. Many people choose a 30-year term because the payments will be lower. People just do not realize how their high mortgage payment can affect their monthly budget. It is hard to begin with; however, if you lose a job, go through a divorce, or have medical bills, making that mortgage payment is even harder.
In addition, there are many other reasons for foreclosure. Statistics show that from 2004-2007, about 1/3 of the country, which is 34 million households, obtained a home equity loan or refinanced their current home. These people needed money, and increased their amount of debt.
During times of high interest rates, people obtained adjustable-rate mortgages or had interest-only payments. They thought they could refinance after the introductory period expired. Unfortunately, some mortgage brokers are dishonest. They gave you more money than you could afford.
Stay calm! Do not fall for scammers! If you are facing foreclosure, people will call or email you claiming that they can make your problems disappear. If you fall victim to these lies, you could be in much worse condition than you were to begin with. To discover how to spot scammers, see the Don’t be Swindled by a Foreclosure Relief Company below.
What Happens Next
Have you given up on trying to save your home or are you going to fight to save it? If you are trying to keep your home, you need to search for a housing counselor that is approved by the HUD. The counselor can give you your choices to see if a solution can be found. You will not pay anything for these services.
You will be informed of which documents your mortgage company needs. The counselor might even contact your mortgage company for you. You will also be informed of some assistance programs that might be right for you.
If a solution cannot be found for you, you will receive a notice that states unless you pay the bill, foreclosure is coming. Each state has different laws, so the procedure just depends on the area where you live. If you cannot find a solution, your home will be sold at an auction.
An Overview of your Choices
When you believe that foreclosure is imminent, here are a few of your options.
1. Use the website www.makinghomeaffordable.gov to see if help is available to you.
2. Make up all of the payments you missed including the additional fees and interest.
3. See if loan modification, forbearance, or a repaying plan is possible.
4. Use the Affordable Refinance Program to see if refinancing is an option.
5. See if you can conduct a short sale or deed in lieu of foreclosure.
6. See if you qualify for a reverse mortgage.
7. File Chapter 7 or Chapter 13 bankruptcy to delay the foreclosure.
8. Go to court to fight or delay the foreclosure.
9. Relinquish your rights to the home.
Get your Payments Current
If possible, you can get back on track by making up all of the missed payments. You will need money to do this.
Reconstruct your home mortgage. Pay off your existing mortgage with a new mortgage. You might can get lower monthly payments.
Bankruptcy can put a halt to foreclosure. With Chapter 13 bankruptcy, you will have up to five years to make up the payments. With Chapter 7 Bankruptcy, you can reduce your debt so you will have room in your budget to pay the mortgage.
If you are older, you can dip into your equity. The lender gives you money, and it will not need to be repaid until you leave the home.
Go to Court
Each state has different rules for foreclosure. If you can prove to the court that the lender broke the law, you could delay the foreclosure process.
You can accept the fact that you will lose your home to foreclosure. This could take months and you will not be required to make mortgage payments, so you can save some money for the future. This could benefit you in the long run.
You can sell the house for less than you owe. You can then pay your mortgage what you owe them.
Deed in Lieu of Foreclosure
You can convince the lender to hand you the deed to the house. If this happens, no foreclosure is necessary.
If your lender forecloses on your home or if you choose a short sale or deeds in lieu of foreclosure, your credit will not plummet that much. However, it depends on your credit before you had trouble making payments.
Foreclosure is not all bad. It could give you the opportunity to obtain a fresh start. You can then start over with a brighter financial future.