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Even potentially facing foreclosure is understandably nerve-racking. After working so hard to get into your purchased home, who would want to have it taken away?
If you are having difficulty keeping up with your mortgage payments, you may have received a few notices informing you that you are at risk of foreclosure. Before you jump to the worst conclusion by preparing for homeless car insurance, you should know that these late notices are not the same as a notice to vacate.
There are a few steps that are taken before you are removed from your home. You can slow down the foreclosure process and intervene in order to remain in control over your home.
Take the Time to Learn about the Process of Foreclosure
If for some reason you are still a little shaky on all the stipulations associated with your loan agreement, you should take some time to understand the loan. Once you have a strong understanding of that loan agreement and everything associated with it, you should then research the process of foreclosure.
By definition, foreclosure is the process of a lender repossessing your home. Foreclosure is a longer process than people anticipate, so if you are late by only a couple days with monthly mortgage payments, you do not have to worry about them coming to evict you right away.
The process towards foreclosure generally begins after 90 days of not paying your mortgage. After those three months, the process of foreclosure can take two to twelve months, depending on your residential location and the lender you have. However, during that time frame, you can still turn things around and stop foreclosure.
Educating yourself on this process can help you release unnecessary stress because you can anticipate any steps the lender may try to take against you. The first late notices that you receive include information on how to move forward with catching up on your mortgage payments.
Holding onto those notices is a smart idea so you can always refer back to them when you are unsure of what you should be doing next. After educating yourself on how your specific lender handles catching up with mortgage payments, you should learn how your state handles foreclosures.
Some areas are judicial foreclosure states, which means the lender has to file a lawsuit against you first. Once they do so, they can move forward with a foreclosure. In states that are not judicial foreclosure states, filing a lawsuit is not a requirement.
Not having to file a lawsuit can make the processes of foreclosing on a homeowner move faster. This reason is exactly why educating yourself on the process should be your first step. Going into this situation with an idea of how much time you have to fix the circumstances is crucial.
Research and Find a Financial Counselor
In most cases, you know that things are going to be financially challenging before you end up being 90 days behind on mortgage payments. With that being said, you should reach out to a financial counselor the moment you recognize it is going to be difficult to keep up with financial responsibilities.
If you are already behind financially, you can still reach out to a financial advisor in an effort to reverse the situation.
One of the biggest mortgage mistakes to avoid at the very beginning is not calculating the total cost of buying a house, which includes utility and maintenance costs. Many people do not consider the entire cost of homeownership, so they end up facing foreclosure when finances grow tight.
A financial advisor can help you rework your financial responsibilities to better accommodate your financial affordability.
Having a professional on your side to help you navigate and disperse your remaining income wisely can reduce the overwhelming sensation associated with financial hardship. To find a great counselor, you can obtain a list of foreclosure avoidance counseling services from the U.S. Department of Housing and Urban Development (HUD).
These counselors can advise you on your state’s foreclosure laws, inform you of your specific options, help you get your paperwork organized, and also negotiate with your lender on your behalf.
Contact Your Lender and Explain Your Situation
It is best practice to reach out to your lender immediately when you are going to miss a mortgage payment or when you have just missed one, but if you did not do so already, that is okay.
Once you have educated yourself about foreclosure, found a good financial counselor, and located the related documents, you should reach out to your lender. Very rarely will your lender turn down working out an alternative plan with you.
Since they earn money from interest paid by customers, it is their goal to keep their customers as long as possible. Having a financial counselor to negotiate on your behalf can result in your lender offering you alternative options that do not include higher interest rates or unreasonable penalty fees.
You or your financial counselor may even be able to negotiate payments that are more affordable to your specific situation. Most banks or private lenders have certain sectors that deal with avoiding foreclosure, but it is always safe to have someone advocating for you when speaking within individuals that work in such departments.
Here are certain loan adjustments that these department representatives can offer you:
- Forbearance – You can delay payments for a short time. Once that time is up, you will have to use another option to bring the account current.
- Loan Modification – The lender can alter your mortgage to extend the length of your loan or make other adjustments to decrease your monthly mortgage payments.
- Repayment Plans – Your lender can allow you to pay off your past due amount in portions until your account is brought current.
In the worst-case scenario where you have run out of time and options to catch up on mortgage payments, you can try to do a short-sale. This is a more complex process than regularly selling your house, especially during COVID, but it is a good way to avoid having a foreclosure on your credit.
Read more: How Much to Spend Preparing a House for Sale