How To Avoid Real Estate Foreclosure In Tough Economic Times...Before It's Too Late

If you're one of the millions of people whose homes have suddenly gone into foreclosure - it's hard not to panic. But you have options to stop foreclosure and protect your home.

Here are the steps you can take to avoid foreclosure. The sooner you act, the sooner you'll be able to keep from losing your home!

The first step in putting a home into foreclosure comes from the lender. The lender files a Notice of Default when you have failed to make your payments on time - or at all.

Once this happens, your options are limited, so it's best to work with your lender before they file the notice. Ignoring your lender's calls, letters or being too embarrassed to speak up can do more harm than good. Explain your situation to the lender and they may offer to work with you in one of the following ways:

1. Offering Forbearance - Forbearance is when the lender agrees to give you time to make up the payments. This is especially useful if outside circumstances, such as a lost job, medical emergency, divorce or other stressful situations have caused you to fall behind.

2. Creating a Repayment Plan - Some lenders will let you add an extra amount - say $100 or more - to each payment to make up the difference. The lender may even agree to lower the interest rate or even freeze it if it's adjustable to help make payments easier on you.

3. Refinance at a Lower Rate - The lender may increase your loan balance to include the back payments. Refinancing at a lower rate is ideal at a time when your adjustable rate mortgage (ARM) is high, and fixed rates are low.

If the lender is unwilling or unable to work with you on creating a payment plan or making the payments more flexible to meet your current situation, you still have other options.

For example, you could sell your home at its current market value. Consider a real estate agent carefully and ask for a comparable market analysis to find the selling price of your home. If your home's value is less than what you paid for it, you may be able to do a short sale.

A short sale happens when the lender is willing to accept less than the amount due. This kind of "debt forgiveness" is rare - especially when it makes more sense to foreclose, and the IRS could consider the amount you've been "forgiven" as income - so consult a CPA and a lawyer before considering a short sale.

If you're not sure where to turn during these troubling times, you may want to call a Housing Counseling agency. These non-profit organizations can help you restructure your bills and payments to make paying your mortgage easier and more straightforward so that you avoid foreclosure.

By following any one of these tips, you should be able to not only avoid foreclosure, but create a manageable budget and keep you home without any desperate measures affecting your future credit score.

That’s all for now. Hope this helps.

The More You Know,

Judy O'