How to Avoid Foreclosure

To the financially overextended homeowner, foreclosure is a specter that never truly seems to be too far off. The last two years have marked a record increase in the foreclosures taking place nationwide, and at this point there is no end in sight. If you are finding that your home might be in jeopardy as well, learn how to avoid foreclosure and save your home or at least your credit rating!

It is true that there are only two ways to truly avoid a foreclosure: make the outstanding payments or sell your home. Within these two ways, however, there are numerous paths that seem to branch off and what may not work for one desperate homeowner is the perfect answer for another one. The result of either way is the same: foreclosure is avoided and your credit record is left intact.

The first real decision you need to make pertains to which way you want to pursue. This of course depends on the reason for falling behind on the loan in the first place. If you fell behind due to an unforeseen event that is of a short term nature, the odds are good that keeping your home is the best choice. On the other hand, if your financial situation has deteriorated to such an extent that the inability to make the monthly mortgage payments is not possible in the long term, then ridding yourself of the debt and the property are probably the better way to go.

If you choose to stay in your home and get caught up on the payments, communicate clearly and often with your lender. Explain that you are looking for ways to make the mortgage work and find out which mortgage workout solutions are available to you. In some cases your lender will ask you for a lump sum payment of past due payments while in other cases the bank will spread the total amount over a number of months. Once you are caught up, you will make your regular mortgage payment as scheduled.

Should you opt for selling your home, you may attempt to sell the property on the open market. Depending on the real estate market in your area, you may have good luck with doing so. Even if you are upside down in your loan, you do not need to despair! An option termed a short sale is a new method by which lenders will allow you to sell the home for less than is actually owed on it and they will accept the funds from the sale as payment in full on the note. You do not owe the difference and are free and clear of both the property and the debt.