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How to Stop a Foreclosure
When you bought your home, it wasn’t with the intention of not paying for it.
Due to circumstances often beyond their control, a lot of home owners have been facing foreclosures in the past year. Job loss, divorce, a death in the family, unexpected increase in other financial responsibilities, and more can lead to a sudden change in financial circumstances. When you can no longer afford your mortgage payment, what can you do to stop a foreclosure?
The first step is to contact your lender, immediately. Don’t wait until you miss a payment. You may be able to work out a forbearance agreement with the lender, allowing you time to make up missed payments through an affordable repayment plan separate from your current mortgage payments. You may also be able to spread out missed payments, added to your monthly mortgage, to make up the missing amount over the course of a year or so.
Another option is to talk to your lender about changing the terms of your loan, especially if you have an adjustable mortgage. He may be able to freeze, or even reduce, your current rate to make payments more manageable. Another potential option, if you have a lender that is very willing to work with you, is to reduce payments by increasing the years you will be repaying your mortgage. There is a better chance of this option being accepted if you have a strong repayment history over the course of several years. If you are just starting a 30 year loan, your lender may be less likely to consider extending the time you have to repay. However, if you have a 15 year loan, or only 15 years left on your loan, your lender may be willing to tack on a few more years, decreasing the monthly payment amount.
If none of these are an option, you do have a few other possible ways to stop a foreclosure. The first way is to simply sell your home before you fall behind. Find a real estate agent, and move into a home that is more affordable, or even rent for a while until you are back on your feet again. If your home is heading towards a default, consider a short sale. Lenders will often agree to the possibility of a short sale, because it prevents them from having to go through the hassle and expense of a foreclosure.
The last option is to sign a deed-in-lieu of foreclosure. You sign your home over to the bank in exchange for getting out of the mortgage without a major ding to your credit score.
If you cannot prevent a foreclosure, you’re certainly not alone. There were just over 2.8 million foreclosures last year. The most important thing to remember is to keep making as many regular payments as you can, to prevent unnecessary damage to your credit score. For most people, the foreclosure itself won’t cause nearly as much damage to their credit score as the months of multiple missed payments will. Repair your credit score, and move on. You can always buy a new home once your finances (and credit) have improved.
Number of Views :141Five Ways to Encourage Foreclosure
No one wants to buy a home, and then lose it to foreclosure. It happens, though, even if you do everything right when buying a home.
There are some things that buyers do, however, that just encourage a foreclosure. Here’s what not to do when buying if you want to keep your home.
- Attend a “no money down” seminar. Most banks won’t even discuss a no money down loan with you anymore, but there is almost always one bank looking to make a profit. In exchange for a 15% interest rate, with the entirety of the loan due within five years, you might be able to get a no money down mortgage. But what happens in five years when you’re still living in the home, and can’t make the balloon payment? You’re going to lose the home.
- Putting your entire savings into buying a home. A down payment and closing costs are expensive. So is hiring a moving truck and getting any extra items you needed for your new home. That’s not an excuse to go overboard and clear out your entire savings account. Don’t assume that you can just start making up the difference again in your next paycheck, or that you should be able to turn to your credit cards for emergencies. Homes are expensive, and you need to have the money set aside for emergencies or to cover a mortgage payment or two if your income is suddenly reduced.
- Don’t take the good advice offered to you buy your real estate agent, mortgage broker, and other professionals you will be working with when buying a home. Don’t assume that you know everything, just because you’ve read a couple books on real estate. These people are professionals, and they want you to move into a home that you like, and one that you can afford. They aren’t giving you advice just to close the sale and collect their fees.
- Choose the most expensive home. Just because you’ve been prequalified for a $300,000 home, does not mean that you can easily afford the payments for that home. Find out how much you can reasonably afford (plan on 33% of your take-home income), and keep to that amount. Overextending yourself will only get you into a home that you can’t actually afford.
- Significantly changing your financial picture before close. Yes, it would be nice to have a new car sitting in your new driveway, or to buy the furniture set you’ve been eyeing as a housewarming gift to yourself. Don’t do it. Your credit score is affected by your available amount of credit. If you use that credit to buy any extras, that can change what the bank can offer you for a loan. It also affects what credit you have available in the case of a financial emergency. Don’t lose the home of your dreams because you just had to have that new dinette set.
No one wants to lose their home. Unfortunately, sometimes things happen beyond your control. Some things, however, you can control. Avoiding these common buyer traps, though, and you’ll be in better shape to keep your finances in good shape, and to avoid foreclosure.
Number of Views :66Mortgage Delinquencies Hit Record High
Mortgage delinquencies hit a record high in June with more than 13 percent of homeowners late with at least one mortgage payment or in foreclosure, according to a report released Thursday by the Mortgage Bankers Association.
“As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago, they accounted for one in five,” says Jay Brinkmann, the association’s chief economist.
Florida is at the top of the heap with a total of 22.8 percent of all mortgages delinquent by at least one payment or in the process of foreclosure. That’s twice the national percentage if the Florida numbers are excluded. The next highest states are Nevada, 21.3 percent; Arizona, 16.3 percent; and Michigan, 15.8 percent.
“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves. In addition, in some areas where a number of borrowers have mortgages that are larger than the current value of their homes, any life events such a divorce or loss of a job are likely to translate into foreclosures until prices in those areas recover, not just flatten,” Brinkmann said.
Source: Mortgage Bankers Association (08/20/2009)
Number of Views :43