Tips For Preventing Foreclosure

Unless you’re a property investor, you probably don’t want to hear the word “foreclosure”. Well, there’s no need to panic. Not yet, anyway. In this article, I’ll outline ways in which you may be able to get out of foreclosure if you’re potentially facing one.

Your house is likely to be subject to foreclosure proceedings once you default on your mortgage repayments, and despite various “warning” letters from your lender, you persist in failing to meet these repayments. At this point your lender will send you a notice that it is beginning foreclosure proceedings. You will have a date by which to pay back all the owed repayments. If you don’t pay this money back by the due date, your lender will sell your house at a public auction or trustee sale.

To get out of foreclosure before you receive a notice of default from your lender, you need to be aware of when foreclosure is likely to happen. If you haven’t made your last one or two monthly payments, you can bet that the bank will be getting concerned. But you don’t want to wait until you reach that point. At the first indication that you may not be able to meet your repayments, you want to take appropriate measures.

It’s still a good idea to be absolutely certain that the situation is hopeless before assuming that you can’t avoid foreclosure. Can your spending in other areas be cut? Is there a second car or other major (but non-essential) asset that can be sold? Can a spouse obtain a second job? Now is the time to take a hard-nosed look at your financial situation and make whatever changes are needed to ensure you don’t lose your home.

All the same, you may well lead a spartan lifestyle and still find it hard to make the monthly mortgage repayments. To put it bluntly, that means that you can’t afford your home. Not under the current arrangement you have with the bank anyway. Unless you take measures to address the situation, you WILL face foreclosure. If that’s the case, get in touch with the bank immediately. They may be open to another arrangement that will work for them, whilst allowing you to keep your home.

Hopefully, the bank will suggest a number of possibilities for allowing you to keep your home. Common options include: taking out a separate loan to cover the amounts you’ve failed to pay to date; extending the life of the loan and thereby lowering the monthly payments; and changing the loan from interest and principal to interest-only.

If none of these options is available to prevent foreclosure, and it’s likely that your home will be foreclosed, you should still co-operate with the lender.

It almost goes without saying that you should be clear about your own rights and responsibilities. This means understanding the terms of your loan agreement, as well as the foreclosure laws that apply in your state. A very real option for avoiding foreclosure is to sell your home by the due date given in the notice of default. This may be your best option, and may even give you a small profit. But even if it doesn’t, it will avoid foreclosure proceedings and the resulting damage to your creditworthiness.

During pre-foreclosure, one of the alternatives open to you is to sell your house. Chances are, various property investors and others will be contacting you to ask if they can inspect your house and make an offer to buy. While it’s reasonable to be skeptical of some of these potential buyers, don’t reject them all out of hand. If you identify one or more buyers who seem legitimate, be open to the possibility of selling your house to them. By doing so, you may be able to pay back all or most of your loan (including the amounts in arrears) and even reap a small profit. Of course, you needn’t wait for potential buyers. You can hire a real estate agent who specializes in selling pre-foreclosure houses to represent you and find prospective buyers.

Foreclosure is an unfortunate 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. Reduce 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.