There are several homeowners who suffer foreclosure annually due to several circumstances. Some may be due to negligence, others may be due to extenuating circumstances but only one thing is common – no one ever dreamed of having their home foreclosed when they started buying their house.
There are several reasons why a homeowner will suddenly be unable to make mortgage payments. Unavoidable instances are topped by sudden unemployment of the breadwinner followed by medical emergencies and death.
The aforementioned simply cannot be avoided, and only hindsight in acquiring insurance or having an emergency fund can help.
Other reasons might include sudden excessive debt due to a change in lifestyle or improper managing of funds.
Still, natural disasters resulting in major home renovations and rebuilds can quickly cripple family on a tight budget.
In any of these cases, there is a common solution: the correct attitude. If you realize that you cannot meet the next mortgage payments on time, it is best to be brave and take initiative.
Talk to the lender
The first action is to talk to your lender and explain the situation. Your lender will treat each situation differently, and it is very dependent on how you lost your ability to pay and how you have been paying your mortgages for the past terms.
Notice of Default
An option is to file for a Notice of Default to give some breathing room. Depending on the state and or the borrower, this can last anywhere from 60 to 110 days before you are kicked out of your home.
Use this time wisely to get back into the saddle and continue paying your mortgage. Although it might be embarrassing, admitting and giving in to a Notice of Default might just save you your home.
Lenders will have several options lined up; from ways you get to keep your home to the dreaded loss. It is important to understand each option to select which is best for you and your family.
A repayment plan allows you to pay your missed mortgages over an extended period on top of your already existing mortgage. Think of it as another loan on top of what you already have. It may or may not have interest.
Increase total loan balance
Your lender can also increase your total loan balance and re-amortize the new amount if you have enough equity and are in good books with your lender.
Note of modification
If your mortgage has an adjustable rate, the lender might freeze or change to a lower rate but increase the amortization period, which is known as a note modification.
Sell your home
Other options that you might dread include selling your home quickly to a third party or to the lender in order to cover expenses, but that would leave you renting or out in the streets as a worst case scenario.
All in all, the best solution to stop foreclosure is to steer clear away from it by ensuring your main sources of income and if necessary, acquiring appropriate insurance in the eventuality of something bad happens.
If foreclosure is already on the horizon, don’t procrastinate and act on it immediately. Discuss with your lender or other lenders as to what you can do about it.
Be honest in all your transactions and hope for the best.