How To Deal With Foreclosure

Every year, millions of homes are put into foreclosure. The states with the most foreclosures are California, Texas and Florida. Roughly 1 of every 200 homes will be foreclosed.

If you're dealing with foreclosure, put away your credit cards and stop charging them.  Put yourself on a spending plan immediately.  Contact your lender's litigation or foreclosure department and tell them you're going through a financial hardship.  Monitor your finances until your other debts are paid in full so you don't get into the same financial situation in the future.  Make sure you confirm the agreement with your lender in writing.  Be sure to consult a tax advisor to determine the foreclosure rules.  Don't be discouraged, there are different ways you can save your home.  Here are 6 great tips to help you when facing foreclosure: 

1.  Mortgage adjustment.   You might be able to refinance the amount owed and expand the term of your mortgage loan for the missed payments.  You may qualify if you've recovered from a financial crisis and your net income is less than it was before you defaulted on the home loan. 

2.  Short sale.   If your home is upside down on the price, you can still offer your lender to sell your home through a short sale.  With a short sale, you could sell your house for less than what you owe on your loan.  Your home does not need to go into foreclosure, you don't must file for bankruptcy and the filing method is much faster.  The lender saves money without needing to file foreclosure proceedings, but does lose money by not getting the full price of the home throughout the sale.  The buyer receives the house at a reduced price. 

3.  Deed in lieu of foreclosure.  You may be able to voluntarily "offer" your home back to your lender.  This might help your chances of getting a future mortgage loan. 

4.  Partial claim.   Your lender might be capable of working with you to get an interest free loan from the Housing and Urban Development agency to bring your mortgage current if you qualify.  To do so, you may visit the HUD website or call 800-CALL-FHA for more information. 

5.  Special forbearance.  A lender could arrange a mortgage repayment plan based on your recent financial condition or may offer a temporary decrease or suspension of your mortgage payments.  You may qualify for this if you have recently experienced a reduction in income or an increase in living expenses.  Most probably you will have to provide proof of your current financial condition. 

6.  Pre foreclosure sale .  You could sell your property and pay in full your mortgage loan in order to help staying away from foreclosure and damage to your credit rating.  If you believe you can't afford to afford to make the payments you may sell the house yourself before the foreclosure sale date and save several of your equity.  Contact a Realtor and tax advisor for rules concerning pre-foreclosure sales. 

Ask the lender if the alternative chosen will be reported on your credit report, if so ask that the option not be reported.  When confronting foreclosure or any financial hardship the important thing is to contact your lender as soon as possible to setup a payment plan or discuss additional alternatives.  Don't wait for the worst to occur - tackle the issue at once.  Normally, lenders are more willing to work with you if you are sincere about your situation.  Whatever option you select as a way to deal with foreclosure, stick to the terms of your agreement and adjust your spending habits so you don't get into the same situation in the future.