1. Foreclosure prevention

 

One of the most serious financial problems that a homeowner can face is losing their house in a foreclosure. In many cases, this property in question is the owner’s only residence and when it’s taken from them; they have nowhere else to go. A foreclosure won’t only rob you of the years of equity you may have put into a house; it can permanently damage your credit and make it almost impossible to get a decent mortgage in the future. No matter what financial troubles you may be having, preventing the loss of your house to foreclosure should be your first concern.

 

There are a number of things that homeowners can do that can help them keep their house and stop them from joining the millions that have lost their homes in a foreclosure. By practicing good financial habits and finding out what your options you have if you do face foreclosure, you can do your best to prevent it from ever occurring.

 

1.1 Evaluate your finances.

 

Many people find that making their mortgage a priority in their budget can help ensure that money won’t be spent on less important expenses first. It probably isn’t worth losing your house just so you can keep making the payments on things like a secondary vehicle or an expensive living room set. If you can tell that your current budget will result in foreclosure, you may to make some adjustments like cutting out anything that isn’t necessary. The most important things are your mortgage payments, utility bills, food, gas for your car, and so on.

 

1.2 Don’t be late on mortgage payments.

 

It’s imperative that you make a habit to never be late on mortgage payments. Your house is probably one of the biggest expenses that you have and it can be very hard to catch up after you’ve missed a couple payments. If it comes down to a choice between your mortgage payment or some other bill/expense, your mortgage should almost always come first.

 

1.3 Clear up any problems with your lender immediately.

 

Occasionally, a mistake made by your bank or lender can cause them to start foreclosure proceedings. If you receive a phone call, email, or foreclosure notice from them and you already made the payments, you need to get the situation cleared up immediately. Contact them and find out what the problem as soon as possible. Make sure you have all of your mortgage-related documents and proof of payments so you can present them if needed.

 

1.4 Don’t spend mortgage money on other expenses.

 

If, for any reason, you absolutely cannot make a mortgage payment, don’t spend the little money you may have on something else. It will obviously be harder to come up with the full payment than it to come up with the few hundred dollars that you might be lacking. Set aside as much as possible and try to get the rest as quickly as possible so you can pay your lenders before they start the foreclosure process.

 

1.5 Talk with your lender about adjusting your mortgage.

 

There are a number of reasons you might want to change the terms of your mortgage loan. By adjusting the length to a shorter loan you may be able to decrease your interest rate. On the other hand, if you are having trouble keeping up with the payments, you might want to change to a longer-term loan that has lower monthly payments. Contact your lender and see what adjustments can be made to your loan and how they will benefit you.

 

1.6 Find out if you can refinance.

 

If you have been making payments on a house for a number of years and have a significant amount of equity in it, a refinance might be your best bet for preventing foreclosure. This means that you can take out the money that you’ve paid towards the mortgage so far and start over with a new loan. Refinancing your home can be a great way to get the cash that you need to bring your payments current. If you’re feeling adventurous, you can even use the left over cash to invest in another house (on the other hand, it may not be a good idea to put money into a second property if you are having trouble keeping up with your current one). It also might be a good idea to refinance if a new mortgage will be cheaper.

 

Some lenders have been known to let homeowners do a “short refinance” which involves forgiving a portion of the debt and letting the owner refinance the rest. Cases like this are quite rare so if don’t expect your lender to agree to something like this (although it can’t hurt to bring it up).

 

1.7 Sell before the lender can foreclose.

 

This foreclosure prevention method is quite common among homeowners. By selling the house you can avoid the serious damage to your credit that a foreclosure can cause and (if you’re lucky) walk away with a bit of cash. A sale can also help homeowners avoid any embarrassment they might feel by going through a foreclosure. If they sell the house instead, they can tell their friends, family, and neighbors that they decided to move, got a better house, etc.

 

Most lenders would rather you sell the house instead of letting it foreclose. They don’t care if it’s you who keeps making the payments or a new owner. All that matters to them is that they get their money. If you’re going to sell the house to someone who can afford to make the payments, they will probably be more than happy to cut you some slack while you find a buyer.

 

1.8 Remember your foreclosure date.

 

Your foreclosure date is the day that your house is set to go to auction. This is the deadline for you to stop the foreclosure and save your credit record. While most options for preventing foreclosure can take up to a couple days or weeks to finalize, there are still a few (ex: selling the house) that could stop it at the last minute .

 

Occasionally, homeowners have been known to stop a foreclosure hours before the auction because they had a contract signed by a buyer.

 

1.9 Consult professional help.

 

If you don’t know how to proceed or you need legal help, you can talk with a financial advisor. These people can look through your finances and figure out what your next move should be. You can also talk with some lawyers about your different legal options or if you want declare bankruptcy. These sorts of procedures take time so seek professional help as soon as it’s clear that you need it.

 

1.10 Don’t fall for a foreclosure scam.

 

The increasingly large amount of foreclosures has created a lot of opportunities for those who want to scam you out of your money (and even your house). When a house goes into foreclosure, the lenders make that that information public so if you receive calls from anyone that sounds shady and offers to help you out, there’s a decent chance that it’s just a scam. (One commonly reoccurring scam is an individual will offer to purchase your property cheaply and sell it back to you later but when that time arrives, they won’t let the house) If someone contacts you and you think that it may be a scam, you can consult someone who deals with foreclosures or loans and see if your suspicions are correct.