Saving Your Home By Avoiding Foreclosure

No-one who buys a home plans to lose it. However, following a period of aggressive lending practices and higher than expected interest rates, home foreclosures have significantly increased in the United States in recent times. More and more families are finding it difficult to meet their mortgage repayments, putting them at risk of experiencing foreclosure. However, losing your home is not inevitable, and in this article I'll explain how you might avoid foreclosure.

Firstly, a quick overview of the foreclosure process… It begins when you fall behind in your mortgage repayments. Because your bank (or other lender) loaned you a large amount of money to buy your home, with your home as security, the bank has the right to sell the property if you fail to meet your loan repayments. So, if you do fall behind, the bank is likely to send you a notice stating that they are commencing foreclosure proceedings. Unless you take steps to avoid foreclosure from happening, the bank will proceed to sell the property at a public auction or trustee sale. You will lose your home and may still end up owing the bank money.

The best way to prevent foreclosure is to stop foreclosure proceedings from being started. This means recognizing the warning bells that foreclosure might be on the horizon. For example, if you're having difficulty meeting a monthly repayment, that's a clear indication of trouble.

If you can't meet one or more mortgage repayments, or can only do so after borrowing from family or taking other such measures, it's essential that you re-evaluate your financial situation. You may need to reign in some of your spending habits. And seriously look at selling off valuables you no longer need. Doing this may (a) give you an amount of savings you can draw on in the future in case you need emergency cash; and (b) enable you to continue meeting your mortgage obligations.

On the other hand, if you suspect that, realistically, you won't be able to meet the current payments each month, don't delude yourself! Rather than hope the problem will go away (it won't), it's best to contact the bank immediately. Explain the situation to them. It's possible that you can renegotiate the terms of your loan or repayment schedule to enable you to keep your house and avoid foreclosure. In the same spirit, you also want to be open to any suggestions made by the bank. When they send you the initial notice of foreclosure proceedings, they will probably provide information about how you can avoid foreclosure. Be willing to discuss your options with the bank, so you can come to an arrangement.

In the case where none of these choices is available to help you get out of foreclosure, you should still co-operate during the foreclosure process. Whatever you do, don't ignore the legal notices sent to you. Doing so may jeopardize your chances, however slim, of keeping your home.

Meanwhile, it behooves you to be aware of both your mortgage rights and your options to avoid foreclosure. Make sure you understand your loan agreement, and the foreclosure laws and timelines in your state. Also know that once the notice of foreclosure has gone on the public record, you may be approached by foreclosure prevention companies or property investors wanting to buy pre-foreclosure properties.

Foreclosure prevention companies will offer to negotiate with the bank on your behalf in return for a fee. Since this fee can be rather large (sometimes 2 or 3 times a monthly repayment) you may be much better off negotiating with the bank yourself and investing that fee into paying back your loan! On the other hand, if it looks as though you won't be able to avoid foreclosure, you may be able to sell your home to a property investor and recover more than you would otherwise. Just be careful - pre-foreclosure investors will be aiming to get the best deal they can out of you. Meanwhile, you don't have to wait for them to come to you - you can put your home on the market yourself.

Going through foreclosure is extremely stressful, but it CAN be avoided. It may be a matter of making some "tough" decisions (e.g. selling assets and curbing spending) in order to meet your repayments and keeping your home… or it may be by selling your home during pre-foreclosure. Either way, it's worth taking steps to prevent foreclosure.

Foreclosure is an unhappy business for a house owner. But it's not inevitable and you may well be able to stop it from eventuating. Maintain a vigorous awareness of your financial situation. Cut your spending. Sell off things you don't need. Renegotiate the terms of your loan with your lender. In short, do what you can to avoid losing your house. But even if you can't keep your house, it's still vital to be proactive. By, for example, selling your house to an investor, you can still stop the foreclosure proceedings, and avoid the consequent credit damage.