For most people, putting an end to preforeclosure isn’t as simple as paying back everything you’re late on in one lump sum and moving on. If you’re still suffering from the same circ*mstances, such as a job loss, that caused you to initially go delinquent on your mortgage, you likely won’t be able to liquidate your mortgage debt all at once – even if your lender offers this option. When you pay off past-due mortgage payments (and any fees incurred) to make your loan current, it’s called reinstating the loan. However, just because you can’t pay everything off right away doesn’t mean you don’t have options. Mortgage lenders would much rather work with you than foreclose on your home. Take advantage of that and explore whether any of these options make sense for you. Your lender may agree to spread out your past-due payments over the course of several months, adding the amount to your regular monthly bill.Talk With Your Lender About Repayment Plans
This can be a good option if you had a temporary setback and are now able to make your regular payments but are having trouble paying back the missed payments.
However, be sure your budget can handle the extra monthly payments. Work with your lender to determine how much you can afford to pay each month. Don’t agree to pay more than what you know you can afford.
With this option, you’ll be able to stay in your home and avoid foreclosure (if you follow the terms of the repayment agreement).
Ask For Help
We all need a little bit of help sometimes. If you aren’t sure of your options, consider reaching out to a housing counseling agency that’s approved by the U.S. Department of Housing and Urban Development (HUD). You can search for a counselor online or call (800) 569-4287.
These counselors will evaluate your situation and help you determine the best course of action. When you call, be prepared to provide some basic information on your financial situation. You may want to have your most recent mortgage statement, recent pay stubs, tax returns, bank statements and other monthly bills with you so you can better answer their questions.
Make sure the counselor you’re contacting is HUD-approved. Scammers often prey on homeowners going through the foreclosure process, and even some legitimate businesses may charge you for services you can get for free from HUD.
Discuss A Loan Modification With Your Lender
If you can’t pay your loan as it was originally outlined in your contract, your lender may be able to modify the termsof your mortgage.
A loan modification typically involves changing the type, length or rate of the loan to lower a borrower’s monthly payments. This could mean the lender extends the life of the loan, giving you more time to pay it off. Or it could mean the lender lowers your interest rate or moves you from an adjustable rate to a fixed rate, so you have a predictable monthly payment.
These options can be helpful if you need a longer-term solution and aren’t eligible to refinance into a new loan with better terms.
Explore Forbearance
With forbearance, your lender will allow you to temporarily stop making payments on the loan. However, once the forbearance period ends, you’ll not only resume monthly payments, but you’ll typically owe the full amount – in one lump sum – of what you would have paid during that time.
This may be helpful if you have a temporary loss of income, but you should be careful about agreeing to a forbearance plan if you aren’t sure you’ll be able to pay the full amount once the forbearance period comes to an end.
Pursue A Short Sale
A short sale can help you avoid foreclosure, but unfortunately, you’ll give up your home in the process. However, if you’re living in a home that you can no longer afford, a short sale may be your best alternative to foreclosure.
When you sell your home for less than you owe on it, it’s called a short sale. If your lender agrees to this, you may be able to satisfy your mortgage debt by selling your home and using the proceeds to pay off as much of the loan as possible, with the lender agreeing to forgive the remaining balance, often writing it off as income to you.
If you’re interested in pursuing this option, talk with your servicer first, and then a real estate agent who has experience in short sales.
Sign A Deed In Lieu Of Foreclosure
With a deed in lieu of foreclosure, you exchange the deed to your home for forgiveness of your mortgage debt. You lose your home to the lender, but you avoid the foreclosure process.
If you want to explore this option, talk with your mortgage lender about whether they’ll accept a deed in lieu agreement.
