If you find yourself struggling to afford your mortgage, there are a few steps you can take to address the situation.
The number of foreclosures in the US hit a peak in 2010 with 600,000 cases. While the numbers have come down since then, mortgage refinancing and foreclosures remain common occurrences.
Foreclosures can have severe financial consequences. According to a LendingTree study, they can drop a credit score by 150 points or more, leading to challenges in securing future loans. If you’re in this predicament, the options available to you may be limited. Nevertheless, there are ways to potentially keep your home or alleviate some of the financial burden.
Some individuals facing foreclosures tend to remain in denial until it’s too late. Ignoring the issue will not help and can limit your options over time. Acting swiftly is crucial. If you’re having trouble making mortgage payments, it’s advisable to contact your lender promptly to explore potential solutions. The US Consumer Financial Protection Bureau recommends being ready to explain your financial difficulties and discuss possible alternatives. Lenders often prefer to work out a solution that allows you to retain your home, especially in oversaturated real estate markets filled with foreclosed properties.
One significant option, besides negotiating with your lender, is refinancing your mortgage. This can involve extending the loan term, resulting in smaller monthly payments. Keep in mind that refinancing typically incurs considerable fees, but it might be a preferable choice compared to losing your home. Alternatively, you could apply for a loan modification with your lender.
If retaining your home is not a top priority, selling it is another viable option. Planning ahead is crucial if you opt for this route, particularly when your property’s value exceeds the mortgage balance. There are two main approaches to selling a property when mortgage payments become unmanageable. A short sale involves selling the home for less than the remaining mortgage balance, with the bank’s approval. While this may not be in the bank’s best interest, it can be a possibility. Another option is a deed in lieu of foreclosure, where you transfer ownership of the property to the lender to avoid foreclosure proceedings. This allows the lender to sell the home to recover their losses.
