Not many threats are more frustrating, scary, and gut-wrenching than the possibility of foreclosure on your home. It’s where you’ve lived, possibly raised a family, and made memories over the years.
The thought of the bank coming in and taking over while pushing you out is enough to make most people sick. If you’re facing the prospect of foreclosure on your home — or worry that it could be an issue down the road — we have good news for you: There are almost always ways you can avoid it.
Here are some solid tips to help you stay in your home.
1. Be Proactive
Most people respond to a financial crisis or foreclosure threat by waiting until the last possible moment to do something. They behave as if they think it’ll go away if they close their eyes and plug their ears.
But no matter how hard you try to ignore it, foreclosure will catch up with you. The best thing you can do is be proactive.
As soon as you find yourself in hot water — even after a single missed payment — you should take action and put together a game plan. Talk to your lender and explain your situation.
If your credit is still good, you may have some negotiating power. If you’ve waited until your credit has tanked, on the other hand, it’s going to be a lot harder to get to a solution.
2. Fix Your Budget
There’s a reason you’re missing mortgage payments. Either your income has gone down or your expenses have gone up. In other words, you probably have a budget problem.
Although you might feel hopeless, drawing up a simple budget that tracks money coming in and going out can help. In the best-case scenario, you’ll find enough money to make your payments.
But even if you don’t, you’ll at least have a better grasp of your financial situation and be able to put your best foot forward.
3. Find a HUD-Certified Counselor
If you go to the U.S. Department of Housing and Urban Development website, you’ll be able to find a list of HUD-certified counselors in your region. These are professionals who specialize in helping people work through their mortgage issues, and their services can often be secured for free.
Another good resource is the Homeowner Crisis Resource Center run by the nonprofit Foundation for Credit Counseling.
4. Try a Voluntary Loan Modification
Are you familiar with a voluntary loan modification? It’s a process in which the lender and borrower come together and agree on an alteration of the terms of the original mortgage.
The modification process is governed by HUD guidelines and may provide you with a way out. “To help your request for a voluntary loan modification succeed, you’ll need to demonstrate that your financial circumstances have changed, but that you still have enough money available to make regular payments if the terms of the mortgage are modified,” bankruptcy attorney Michael H. Schwartz explains.
5. File for Bankruptcy
As a last-ditch option, you could file for bankruptcy. This isn’t something you should do lightly, but it can be an effective way out.
“Once you file for bankruptcy, something called an automatic stay immediately goes into effect,” attorney Amy Loftsgordon says. “The stay functions as an injunction prohibiting your mortgage lender from foreclosing on your home or otherwise trying to collect its debt. This means that any foreclosure activity must be halted during the bankruptcy process.”
Don’t Lose Your Home
Your home is probably the most valuable and precious asset you own. It’s not just a physical structure; it’s has treasured memories attached to it.
If you’re facing an imminent foreclosure, take immediate action and pursue the steps outlined above to save your home before it’s too late.