When you buy your home, you do so with the idea that you’ll always be able to afford the mortgage payment. Unfortunately, things have a way of changing as the months turn to years. Should you find yourself facing foreclosure, you still have options. Your home isn’t gone just yet.
The first thing to consider is selling your home. Is your property worth more than you owe? If so, you can sell it, make your back payments, and use the rest of the funds to secure a new place to live.
If this approach doesn’t work for you — perhaps because you’re underwater on your mortgage — you still have options. Here are several others to consider:
1. Conduct a short sale
This allows you to sell your home for less than what you owe. When approved by the lender, the difference between the sale price and mortgage balance is forgiven. If you’re interested in this, first contact your lender to determine if they’re on board with the idea.
2. Request a forbearance
With forbearance, you can temporarily pause or reduce payments. This gives you time to catch up without the feeling that your lender is looking to repossess your home. If you head down this path, make sure you have a plan for catching up on your payments and maintaining them over the long run.
3. Apply for a loan modification
This is exactly what it sounds like. You request that your lender modifies the terms and conditions of your loan. This could come in many forms such as a lower interest rate or longer term. The goal of a modification is to make your monthly payment more affordable.
Along with the above, if you have enough cash on hand to catch up on past due payments, consider parting with the money to restore your good standing. Even if you don’t have all the cash you need, you can offer a partial payment in exchange for your lender stopping the foreclosure process.
The key to success is maintaining an open line of communication with your lender. If you miss a payment, reachout to discuss your options. If you receive a foreclosure notice, call your lender right away. Hiding and hoping for the best isn’t a good strategy. It’ll eventually catch up to you, and when it does you may find that it’s too late to save your home.
Do you have any experience with the foreclosure process? Would you add any other strategies to the list above?