Tips to Avoid Foreclosure

The word “foreclosure” is admittedly one of the scariest words for any homeowner. The past three years have seen an improved economy and the darkest days of the burst real estate bubble are seemingly behind us, but there are still many homeowners who have yet to fully recover from the economic downturn of the late 2000’s. If you’re one of the people who find yourself still trying to dig yourself out of the financial quagmire, here are some tips that could help you avoid the dreaded “F” word and hopefully start you on the road to recovery.

1) Don’t Ignore the Problem

It’s easy to slip into the mindset ignoring the problem might somehow make it go away, that you’ll catch up next month, or worse, that the problem is too far gone for you to do anything about. The truth is that further behind you get, the harder it will be to reinstate your loan and work out an arrangement with your mortgage loan company. Which brings us to…

2) Contact Your Lender Sooner Rather Than Later

Many mortgage companies have established new plans and methods to help you save your home from foreclosure, but they often depend on acting sooner rather than later. Trust us: mortgage companies DON’T want your house; it’s much more financially advantageous to them to help you figure out a repayment plan that gives them their money back and allows you to stay in your home.

3) Read and Respond to All Mail from Your Lender

The notices you receive when you first fall behind often have great information contained in them about what payment options you can take advantage of if you act right away, so even though it’s tempting to ignore those notices, it’s best to read everything thoroughly and weigh the possibilities. Later mailings could be legal notices, and by that time, it might be too late to do anything effective. Furthermore, saying you didn’t receive or didn’t read mail from your loan mortgage company is not going to help you in foreclosure court, so force yourself to open that mail and confront the issue head on.

4) Know Your Rights

Keep all your mortgage loan documents, and read them to see what your rights are and what your mortgage company can do in the case of non-payment. Also, taking the time to learn about the foreclosure laws and time frames in your specific state will help you know what choices you have available to you. You can also check out HUD for valuable information about foreclosure prevention.

5) Prioritize Your Spending

Next to healthcare, keeping your home should be your top financial priority. Review your current monthly budget and see where you can cut spending to get the money you need for that mortgage payment. Expenses like cable TV, entertainment spending, memberships to clubs and gyms and little extras like spendy hair cuts or all things to eliminate immediately. Look at your current food budget, and cut back on expensive takeout and eliminate some of those pricier indulgences on your grocery list. Exchanging steaks for ground beef and deli cheese for pre-packaged slices can make a big difference. And put off unsecured debt payments like credit cards for as long as possible to make sure that mortgage gets up to date.

6) Sell Your Assets

Have a second car, jewelry, art or silver or gold collectibles? You will likely never regret selling these types of items if it means hanging onto your family’s home. And if you or your spouse can get an extra job until you dig yourself out of the mortgage hole, that’s another great option. Not only will this possibly help you make ends meet, but it will also show your lender that you’re willing to make sacrifices in order to get back on track, which might make them more amenable to working out a solution with you.

7) Look at Investments

If you have some money tucked away in a CD or savings bonds that haven’t mature yet, you can pull that money out early. Yes, you might lose some of the amount you would’ve earned if you’d waited until it’s full maturity date, but you put that money away for a rainy day, and it’s time to pull out the umbrella. Have money in a 401k? Many 401k plans allow you to take out money with little to no tax penalty if the withdrawal is to protect you from foreclosure, so call your fund company to see what your options are.

8) Avoid Foreclosure Prevention Companies

Though it may seem like a good idea, for-profit foreclosure prevention companies aren’t something you need. Many of these companies, even the legitimate ones, will charge you exorbitant fees (sometimes as much as three months worth of mortgage payments) to pay for them to “negotiate” with your lender or provide you with information that you can obtain on your own, or from working with your lender or a HUD-approved housing counselor.

8) Beware Foreclosure Recovery Scams!

Any organization that claims they will stop a foreclosure immediately if you sign something that allows them to act on your behalf is SHADY, period. It’s likely you’re signing over your title, and you could find yourself ending up a renter in your own home. Never sign any sort of legally binding document without talking to an attorney, a trusted real estate agent or a HUD-approved housing counselor.