Investigate These Alternatives To Foreclosure

If your mortgage interest is adjusting to a rate you can no longer afford, or you have been laid off or had a serious illness, you may be wondering how to avoid home foreclosure. There are solutions for avoiding mortgage foreclosure. Here are some options to consider.

How to avoid home foreclosure

  • Short sale. A short sale is when you owe more on your home than it is worth. A qualified, experienced real estate agent who has experience in short sales is a crucial partner in the process. Short selling your house keeps foreclosure off your credit record, and you can qualify for another mortgage in a much shorter time period. A short sale letter must show financial hardship, such as a mortgage rate that has increased, a job loss, divorce, illness, excessive debt or other qualifying event.
  • Forbearance. A forbearance allows the overdue mortgage amount to be repaid over a period of time. Usually the homeowner pays the regular mortgage amount plus a percentage of the back payments. In some instances, the lender requires the homeowner to qualify for forbearance.
  • Deed in lieu of foreclosure. In this foreclosure option, the homeowner returns the property to the mortgage company instead of going through the foreclosure process. The lender will only give a deed in lieu to property that is in good condition. A deed in lieu can keep a foreclosure off your credit report, although some lenders do report it to the credit bureaus as a foreclosure.
  • Mortgage modification. This solution can lead to a mortgage payment that is more affordable to the homeowner, through a lowering of the interest rate, the loan term or the principal balance. The consumer should be careful about mortgage modification scams. There are HUD approved mortgage loan counseling agencies that are government funded and are a good first step to getting your mortgage modified.
  • Rent the property. Finally, you can rent out the property if your mortgage payment is low enough. Using this solution, you can keep the property, but remember that rental fees do not always cover the cost of taxes and maintenance.