Avoid Foreclosure


If you're behind on your mortgage, don't automatically assume that you'll lose your house. Quick action might allow you to keep your property.

Raise Funds: Examine your spending to see if you can slash expenses. "People waste lots of money on things like $3.75 lattes," comments Randy Johnson, author of How to Save Thousands of Dollars on Your Home Mortgage. Can you get a second job? Swap your car for a less costly one?

Contact your lender immediately: Lenders prefer a performing asset over a foreclosure and are frequently willing to work out a repayment plan. You'll need to provide a detailed financial picture and outline your strategy for staying up-to-date with our mortgage. Here's an example of what lenders will need: www.housingeducation.org/edi/pdf/edi_worksheet.pdf.

Whenever you're asking for help from a lender, it's suggested that you clearly illustrate what you have done, such as selling a car and meeting with debt counselor etc. to avoid future crises. Here are some options they often consider.

Forbearance: Lenders may let you make a lower or no payment temporarily...say for three to six months. You'll most likely have to make higher payments when you start paying again to bring the loan up-to-date.

Repayment: If you've recovered from crisis, lenders may allow you to pay more each month for a set period to make up missed payments.

Modifications: Lenders can reduce interest rates and extend loan terms to reduce the monthly payment.

Short refinancing: Under a short refinance, you refinance and the original lender accepts a payoff for less than you owe. You need to prove that the lender would lose more if the property gets foreclosed upon.

Short sale: You can sell the property and lenders may agree to accept less than you owe. This saves you from having a foreclosure on your credit record.

Before accepting any deal, consult with your accountant. Depending on the type of loan you have, you could owe taxes on forgiven debt.

Scott Wilson

Futura Financial Inc.
El Monte CA

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