What can you do it you are behind on your mortgage payments?
After taking a look at your budget, and at the appropriate stage in the foreclosure process, you can call your lender. Most lenders do not want you to lose your home, but they do want paying borrowers. Follow profession advice on how to approach the lender and explain what caused your arrearages, and what has been done to correct the problem. Be prepared to discuss a workout.
Be sure you do not call the lender too early, they can't offer a workout, or too late, your house is too close to the foreclosure sale date. There is a 'right' time to contact the lender, each case is somewhat different. Get guidance before you call your lender.
Don’t ignore letters from your lender Let them know you’ve received their letters and that you want to work with them. Letters are often sent certified mail, and even if you do not pick them up, they are considered delivered. You are better off picking them up and reading them so know exactly what process is taking place, if you have a sale date, what your arrearages are etc.
What options might the lender offer to stop foreclosure sale?
Your lender may have a program to put the past due payments on the back of the loan, in which case you will typically have to pay attorney fees and any lender costs up front, with the past due payments put on the back of the loan. This is an expensive way to go because of the extra interest, but it is better than losing your home.
A loan work out or repayment plan may also be an option. In this situation you are required to pay a portion of the back payments up front, along with fees and costs. Then the lender takes the remaining past due amount and spreads it out over several months so you are then current. The most common repayment time is 6 months, but sometimes lenders can offer a 12 month plan. There are keys to successfully qualifying with the lender, so be sure you know these.
Don't be fooled by thinking you can get a new loan. Once you are in foreclosure, 90 days behind, you most likely don't have enough equity to qualify for a loan, especially in todays tight credit market. Wasting precious time while depending on a new loan has caused many people to lose their home to foreclosure.
If you truly cannot afford your home you might want to consider selling. Again, in todays housing market this might be difficult. Your lender may be willing to do a short sale, you will want to check this out when making your decision on whether to sell or not.
In some states there is a redemption period, the time between when your home was sold in foreclosure and when you have to vacate. This redemption period varies from state to state and can be from less than a month to 6 months or more. In cases where homeowners cannot afford their home and can't sell, staying in the home for free during the redemption period allows you to save money for moving at the end of the redemption period.
Another option sometimes offered by the lender is referred to as 'cash for keys'. In this case the lender will offer the delinquent homeowner cash to vacate the home. Remember, foreclosure can cost the lender up to $30,000 so they are sometimes willing, in the early stages, to offer cash to the borrower if they are willing to relinquish the home without a foreclosure proceeding.
As a last resort, if you can truly afford your mortgage payments but just need more time, you may want to speak with a bankruptcy attorney. Be careful! Attorneys make a lot of money by filing bankruptcy and it may not be the best choice for you. If you miss just one payment in your Ch. 13 you are right back where you started and you are now minus the several thousand dollars you paid the attorney. Think very very carefully before filing bankruptcy.
The most important thing is to do something! If you just sit there frozen you will most surely lose your home without the benefit of planning on your part. Analyze your situation, get the facts, and take action. Even if you end up choosing to lose your home, you can do it in a manner that benefits you the most.
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