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How To Avoid Home Foreclosures

Are you facing foreclosure? A home foreclosure can severely damage your credit score, and it stays on your record for 7 years. Your credit score plays a key role in your financial life, from everything to buying homes and cars to applying for jobs and apartments. Foreclosures should be your last resort. Here are some tips to help prevent foreclosures:

foreclosure

Lender negotiation: If there is a reasonable expectation that you will be able to resume making regular mortgage payments within a relatively short time frame, the lender may be willing to work with you to establish a payment plan to bring the loan current. “Especially in today’s market, this is a greater possibility,” says Housser. “Many individuals are having trouble due to an unexpected job loss, medical expenses, divorce or other personal trauma. If the situation has some resolution so that the regular payments may be able to be met again, it is worth it to call the lender.”

Refinancing: It may be possible to refinance a mortgage for a lower interest rate and/or lower monthly payment. But if you have already had late payments on a mortgage, the interest rate offered may be too high to lower your monthly payment. Housser recommends using online rate comparison sites and calculators to determine the “real costs of refinancing.”

Forbearance agreement: For a temporary hardship, the lender might grant you a forbearance agreement to lower – or eliminate – payments for a limited time.

Short sale: In a short sale, the lender accepts less than the mortgage debt when the property value has declined. “A short sale will prevent foreclosure,” says White. “However, if it takes place after foreclosure was initiated, the foreclosure and the related delinquency in payments will be reflected on the credit report.” The only way to protect the credit score fully is to maintain monthly payments until the house is sold.

Chapter 13 bankruptcy: If the loan default is past the point of being resolved with the lender, you may file for chapter 13 bankruptcy protection. This protection requires you to resume making regular mortgage payments but allows the arrearage (being overdue in payment) to be repaid over the course of the chapter 13 plan.

Loan modification: This entails a permanent change to the loan, such as lowering the payment and extending the loan’s term or incorporating any delinquencies into future payments. “Lenders are more willing to discuss this now than they were before,” adds Housser.

Deed-in-lieu of foreclosure: In this case, the lender takes ownership of the home, but that will not eliminate the negative impact of a payment delinquency or foreclosure that has already begun. “Bankruptcy remains on a credit report for 10 years, but it can offer a way to become current in payments, which will improve the credit score,” White notes.

One thing to consider is that all of these tips require you to resume payments somewhere down the line. You can’t avoid foreclosure and not make your payments. If you don’t think you’ll be able to eventually resume payments, it may be better to just go through with the foreclosure.

All things considered, a foreclosure won’t ruin your credit rating forever. It will lower your credit score and remain on your credit report until you’re able to re-establish good credit — which takes time and careful planning.

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2 Comments on “How To Avoid Home Foreclosures”

  • Jace
    April 11, 2011

    Got it! Thanks a lot again for hlepgin me out!

  • Carlos Hamberry
    July 11, 2011

    Great read and i’m glad you will find people posting good content similar to this for individuals to view when seeing a doctors office or browsing line someone where… Appreciate inspiring me developing a nice publish.

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