Tips for Avoiding Foreclosure
Learning how to stop foreclosure is crucial if you have fallen behind on your mortgage payments, and are at risk of losing your home. Foreclosure help is available from many federal and state programs, meaning that you may have more options than you think if you are facing such a crisis. No matter which option you choose, the best thing you can do is act quickly. The longer you wait to take action, the likelier it will be that you will lose your home.
Your options to avoid foreclosure will vary, depending on what type of loan you have, as well as the laws in your state. For example, those who have FHA loans versus conventional loans may have different options. In any case, the Department of Housing and Urban Development (HUD) is one of your best resources when looking for ways to keep your house. Below, learn more about the types of foreclosure assistance that may help you keep your home.
The First Steps to Take to Prevent Foreclosure
Help for a foreclosure is available at every stage, but you will have a better chance of keeping your home if you act quickly. As soon as you realize you are unable to make your payments, there are several steps you can take to decrease your chances of losing your home. These include:
- Accept that foreclosure may become a reality if you do not take action.
- Contact your lender immediately, and do not ignore letters or fail to respond to communications.
- Learn the foreclosure laws in your state, and what actions your lender can legally take.
- Make a budget to see where you can cut down on spending.
- Consider selling assets or getting an extra job, in order to make ends meet.
If you are wondering, “When is it too late to stop foreclosure?” keep in mind that the answer will vary, depending on where you live and what policies your mortgage lender has. Always start by talking to your lender to learn what your best options are.
Ways to Stop Foreclosure and Keep Your Current Mortgage
When researching how to avoid foreclosure and keep your home, note that the HUD advises it is usually best to try and keep your existing mortgage, when possible. There are several short-term loan workout options that will help you keep your mortgage, and make your payments more manageable during a hardship, or to make up for missed payments. These include reinstatement, forbearance and establishing a repayment plan.
Learn more about your options in our comprehensive guide.
If you do not think you will be able to continue paying your mortgage after catching up with your payments, you may want to consider a mortgage modification in order to permanently change the terms of your existing mortgage. Your lender may be willing to change your interest rate, extend the term of your mortgage or add the amount of your missed payments onto the total balance you owe. In the event you have mortgage insurance, you may also avoid foreclosing by qualifying for a loan from your mortgage lender, in order to catch up on your past-due payments.
Federal Programs That Can Help You Avoid Foreclosure
When asking how to avoid foreclosure with bad credit, there are plenty of programs available from the federal government through the HUD, FHA and the U.S. Treasury. Examples of programs that may help you include:
- Principle Reduction Alternative (PRA).
- Second Lien Modification Program (2MP).
- Home Affordable Refinance Program (HARP).
- Home Affordable Unemployment Program (UP).
- Emergency Homeowners’ Loan Program (EHLP).
Learn more about federal programs by downloading our informative guide.
Additionally, one of the best ways to avoid foreclosure is to seek out HUD-approved housing counseling. This option will help point you in the right direction, and can be especially helpful if you are having trouble working on a solution with your lender.
How to Prevent Foreclosure If You Have an FHA Loan
You can help stop foreclosure using several additional methods if you have an FHA-insured loan, as opposed to any other type of mortgage. First, you may be able to qualify for the Home Affordable Modification Program (HAMP), which allows you to use a partial claim in order to postpone payments on your mortgage principle until after you have satisfied your first mortgage. Second, the HOPE for Homeowners (H4H) program may help you refinance your mortgage if you cannot make your payments.
How to Avoid Foreclosure Prevention Scams
Deciding what to do if your house is in foreclosure can be overwhelming experience. Unfortunately, many scammers are poised to take advantage of homeowners who are at their most vulnerable. Avoiding foreclosure scammers requires that you diligently screen all forms of communication that you may receive about solutions to keep your house. Keep these tips in mind to avoid scammers:
- Third parties cannot preapprove or guarantee a loan modification – only your mortgage lender can do this
- Look out for anyone who asks to be paid in advance for modifying your mortgage, or anyone that insists on being paid with a cashier’s check or wire transfer
- Be wary of companies that ask you to send mortgage payments to addresses that are different from the one on your usual mortgage statement
- Avoid individuals who advise you to stop communicating with your mortgage company, or to stop making payments
Steps to Take if You Cannot Avoid Foreclosure
Unfortunately, it is not always possible to prevent foreclosure, but there are still ways to make the foreclosure process go more smoothly. If you are not sure what to do when your house is in foreclosure, you may want to consider the Home Affordable Foreclosure Alternatives (HAFA) program, which will help you transition to a more affordable housing option. If your home has already been sold in a foreclosure sale, there is still a “redemption” period, in which you can reclaim your home by paying the outstanding mortgage and other foreclosure fees.
Another solution if you cannot avoid foreclosure is to offer a pre-foreclosure sale, which allows you to sell your house at fair market value with the permission of your lender. As a last resort, you can also choose to give your property back to the lender, voluntarily, in exchange for having your relocation expenses covered.