The housing market was hit with a big wake-up call when a record-breaking 2.8 million properties suffered foreclosure in 2009. By 2013, CNN Money reported that notices of foreclosure were down to just over 127,000 per month, meaning that the housing market is smoothing out and foreclosures are no longer occurring at near-crisis levels. Now that the housing market is better braced for foreclosures, many homeowners are finding their lenders more open to negotiating a way for them to keep their homes. If you've found yourself in the unfortunate position of facing an impending foreclosure, know that you have options. Don't pack your bags just yet. Here are some avenues to pursue before you agree to a foreclosure.
If you start to miss your mortgage payments, it can be scary to receive that first demand letter or notice of default. Do keep in mind, though, that a notice of default is not a notice of foreclosure. While receiving a notice of default is not ideal, you do have time - time to attempt to pay back what you owe; or time to try to find another place to live. One of the easiest and most effective ways to keep your home safe from foreclosure is to modify your loan and change your monthly payment. Modifications like lowering the interest rate, extending the term or changing the type of interest rate can help.
Foreclosure laws vary from state to state. Some states have long timelines for foreclosures, others allow homeowners a grace period where they can stop a foreclosure from happening, and others still have laws that make homeowners liable for any mortgage debts that remain after the foreclosure sale is finalized. Your mortgage terms are unique, so read every piece of mail you receive from your lender. Some lenders have the right to sell your house if you don't make your mortgage payments. Know if your mortgage has such a clause, and don't ignore correspondence from your lender.
If you have missed a couple of payments, call your lender and see what can be done to keep your home; many banks are surprisingly understanding and will want to work with you to find a more favorable arrangement. If your lender can't help, try talking to a Foreclosure Avoidance Counselor, available free of charge through the US Department of Housing and Urban Development. These counselors are trained to explain the laws pertaining to foreclosure in your state, help you explore alternatives to losing your home, get your financial documents in order and help you talk to your lender. This is a not-for-profit service - be wary of other services that offer foreclosure avoidance for a fee.
If foreclosure becomes unavoidable, it is advisable to turn your house over to your lender before the foreclosure happens - it will save your credit score from damage and may allow you to buy another home in the future.
Foreclosure doesn't have to be the end of the road for you and your dream home. While it may seem inevitable that you will lose your house, don't lose hope. There are plenty of ways for you to try to salvage what you have without causing further debt, heartache, and years of bad credit. With a bit of careful research and enough strength to speak openly and honestly with your lender, you could save your home, along with all the wonderful memories you've created while living there.