Nobody wants to lose their home. But, if you begin to miss mortgage payments, your lender can decide to begin the foreclosure process. This usually occurs between the 60th and 90th day of delinquency with a Notice of Default or Summons sent to your home. This is not to be taken lightly. In the case that you find it is getting difficult to make your mortgage payments, it is wise to act quickly. That’s because there are several steps you can take to prevent foreclosure on your home, but only if they’re done at the very onset of the problem.
Most people are under the assumption that a lender is more than happy to foreclose on their house. This is not usually the case. The lender wants the money, not the house, and will typically try to work something out with you first to see if you can come to an arrangement on making the payments.
Before contacting the lender, you should assess your entire financial situation. A good worksheet you can use to do this can be found at www.balancepro.net. The worksheet guides you through a brief outline of your overall financial picture, prioritizing problems (being late on your mortgage would probably be the first), conducting a personal financial assessment to help determine your specific circumstances and calculating the equity in your home.
Depending on your findings, there are several options available to prevent foreclosure. The easiest way is called reinstatement. This is when you pay the lender everything you owe, including missed payments and late fees. Since this may be a hefty sum, consider what funds you have at your disposal. You may find that you could sell a car, cash in some stocks or borrow the money from a friend or family member. When it means keeping your home, you might find there is money after all—just not in the most common places.
If reinstatement is not an option, you can ask the lender to draw up a repayment plan to help make up missed payments. The payments, however, will likely be higher than your average monthly payment meaning additional money will still have to come from somewhere (perhaps from taking a second job for a while to help you catch up). Another payment alternative is to ask for a forbearance agreement. This will allow you a few months of low or no payments with the understanding that payments later will be higher.
Some lenders may consider a modification of the loan itself. This is not as likely to happen because it means changing one or more terms of the original agreement, such as lowering the interest rate or switching from an adjustable rate to a fixed rate mortgage. Another way to change the terms of the loan is to refinance; however, this is not likely an option either if you are already behind in payments. If you are current, though, and have equity in your home, this may be an option.
Remember, the lender doesn’t want your home, they want their money, and it is likely they will work with you. But it’s your responsibility to contact the lender (hopefully while you’re still current on your payments). Being proactive instead of reactive is the best way to keep from losing your home.