Mental health, emotional wellbeing & personal development

What to do if you are facing a foreclosure

What to do if you are facing a foreclosure

Debt, money issues and the possibility of losing your home can all affect our mental health and cause emotional issues such as anxiety and depression. Here is advice on what to do and a resource for further tips/help. Mandy X

The possibility of foreclosure is always daunting for homeowners. When you miss three of your mortgage payments, your loan provider might go ahead and file a Notice of Default (NOD). This means that there’s a good chance that he will move ahead with a foreclosure of your home to get his money back.

What to do when facing a foreclosure

A foreclosure means you will have to let go of your home. Plus, your credit history will be affected. Here’s what you should be doing if you find a foreclosure might be coming up:

Seek Financial Help

Not everyone can wade through all the terms and conditions of a mortgage loan. Not all of us are financial experts. Far from that. If you find all the financial stress overwhelming, you should consider getting some financial help.

Seeking good financial advice doesn’t mean you have to spend money that you don’t have. The US Department of Housing and Urban Development (HUD) has a list of nonprofit organizations that offer foreclosure avoidance counseling services. You can contact them to get to know your rights and review your home loan terms for free. They will even get in touch with your lender to negotiate better terms for you.

When meeting your HUD-approved financial counselor, take all your home documents. Sit down with your counselor and go over the terms of your home loan. Talk to him about a way on how to handle the situation.

Talk to your Lender

Once you have a financial expert to help you out, you should get in touch with your lender. Ask your financial counselor to guide you on how to deal with the lender. Ideally, do it when you miss your first mortgage payment. This will help you negotiate a better deal. Most loan providers want to avoid foreclosure also. This is why they may be willing to make a few changes to your loan agreement. Here’s how you deal with your loan adjustments:

* Loan Modification: Ask for revision on your loan payment plan or term.

* Refinancing: Create new terms for your loan. Ask for a restructuring of your entire loan plan to cover for all the payments you have missed.

* Repayment Plan: You can ask your loan provider to let you pay your due amount in installments.

* Forbearance: Get your loan provider to delay your payments while you find a way to arrange for your payments.

Prioritize Your Expenses

Your home loan should be one of your biggest priorities. When you get your loan provider to revise the terms of your loan agreement, go over your expenses. Cut down on all extra expenses. Live frugally until you are able to pay off your past payments.

Look for Government Assistance Programs

The federal government has introduced a few programs to make it easier for homeowners to avoid foreclosure. You basically have two options when you apply for government assistance. This includes refinancing and loan modifications. Get your lender on board with your plan. Talk to your financial counselor. Ask for his help.

A Short Sale

A short sale is when you ask your loan provider to sell your home lower than its market value. When your loan provider forecloses your home, he will then want to resell the house. This can be a tiresome process for the loan provider. So, if you go ahead and offer your lender a reasonable offer by another buyer, they may be willing to sell the home at a lower value to avoid going to the trouble to finding a new buyer.

You will probably end up losing your home, but you can avoid the foreclosure being recorded in your credit history.

Consider Declaring Bankruptcy

If you are willing to declare bankruptcy, you can retain control over your home. When you file for bankruptcy, you are protected by federal law which prevents debt collectors from making any collections from you. This also includes mortgage lenders.

After you file for bankruptcy, the foreclosure process on your home will come to a halt. But this doesn’t mean that you can get away with avoiding payments for your home. The bankruptcy trustee will add as a mediator with your loan providers. He will request some time from your loan provider to let you pay off your loan after you get access to a stable income source. Before filing for bankruptcy, you should contact a bankruptcy attorney. Talk to him about your plans and whether filing for bankruptcy would be a good idea.

If a foreclosure seems inevitable, remember that it is going to have a negative effect on your credit report. The good news is that you can get it removed for your credit report so that it doesn’t affect your chances of a home loan later.

Read more on the 3 Easy Steps to Remove a Foreclosure from Your Credit Report

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