If you want to avoid foreclosure, there are many options available to you like doing nothing at all, filing bankruptcy, short sale, and loan modification. Filing bankruptcy is definitely not a good idea because it can have a negative effect on your credit rating. Doing nothing is also not good because in the future, you will face the ‘what if’s’ since you didn’t act on the problem.
What about a short sale? This is also one way to avoid foreclosure. Some banks may allow a short sale, especially if the financial loss is smaller as in comparison to foreclosure. However, selling your home can take time since the housing market was greatly affected by the economic downturn.
If you opt for a short sale, you will still be paying for the insurance, taxes, and the mortgage payments. The prices of homes today are not very attractive, and if you are going to short sell your home, you can encounter more problems. The best solution would be to apply for a modification of your existing mortgage loan.
The most common form of modifying a loan is reducing the rate of interest, the balance, forgiveness of the default fees or payments, or perhaps combination's of these conditions. Refinancing is not always possible for homeowners facing foreclosure but this shouldn’t stop you from applying for the modification. Once your application is granted, foreclosure will also be stopped.
People who applied for modification of their mortgage loans without the help of attorneys or other third-party companies are often denied by the lenders. Due to this fact, it’s much better to seek the help of a professional so that an agreement with the lender can be made quickly and efficiently. With bankruptcy, you can’t save your credit but with modification, you can.
It’s typical for lenders to send out letters of foreclosure so that the homeowner will be forced to pay the monthly payments. However, if you simply negotiate with them, the terms of your existing mortgage loan can be modified. Consult your lender about the loan modification procedure and try to comply accordingly. Also, seek help from the experts so that you can carry out the process with ease.
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***Update***
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