Foreclosure alternatives

Foreclosure is possible for anyone that can't keep up with their scheduled payments on their mortgage.

Foreclosure means the lender can repossess your home and force you out. If you have negative equity (you owe more on the house than the lender can sell it for), you can lose your home and still owe the lender the balance. A home worth $175,000 that you owe $165,000 on the mortgage and the lender sells for $150,000 would leave you still owing $15,000 to the lender. Foreclosures and deficiency judgments go on your credit report and can affect future requests for credit.

Don't ignore correspondence from your lender. Contact them as soon as possible and explain your situation. If you are just having temporary problems, be prepared to show how you will resolve it and ask if they have any programs for financial hardship. With financial information to back up your solution, they will probably work with you on it.

If your loan is fha insured, the u.S government, a private, or a community organization may be able to assist you. Hud approved housing counseling agencies can be obtained by calling 1-800-569-4287. Most of these services are free and include credit counseling.

What alternatives do you have'

Special forbearance is where you work out an arrangement plan with your lender based on your financial situation. You must be honest be able to explain why you are behind on your payments. This is normally a temporary solution and works where you have experienced a reduction in income or increase in expenses. You must prove to the lender that you can meet the new arrangements without falling further behind.

Mortgage modification is where you restructure your mortgage loan by extending the length to decrease the payment amount. This will generally only work if you have paid the loan down and have built up equity in the property. Again, to qualify, you must prove that you can financially afford the new payments.

Pre-foreclosure sale is an alternative is an alternative if you are at least two months delinquent on your mortgage payments. This avoids foreclosure by allowing you to sell your house in three to five months. However, a new appraisal is required that shows your home is worth less then the amount owed on the mortgage.

Deed-in-lieu of foreclosure is where you give back the house to the mortgage holder so they do not have to foreclose on it. This does not hurt your credit rating as bad as a foreclosure. You must be in default and not qualify for any other options. You must have tried to sell the house before foreclosure and could not find a buyer. You must not have any other fha mortgages in default.

To determine whether you qualify for any of these options, you must talk to your lender or a housing counseling agency. Foreclosure is bad for your credit rating, so if you can avoid it by honestly working with your lender, you will be better off.

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