How to Stop a Foreclosure

Foreclosure isn't something anyone wants to deal with. However, sometime homeowners face sudden extenuating circumstances that force them to stop making timely mortgage payments. These reasons may include unexpected unemployment, sudden illness or medical emergency, a death in the family, or divorce. The path to foreclosure is short and moves quickly. If you miss even one payment, you could risk losing your home to the bank. If you find yourself unable to pay your bills, there are a few things you can do to help ensure you keep your home and hold off foreclosure.

The first thing you should do is review your original loan documents and examine your monthly income and budget. Itemize and carefully go through all of your expenses. Consider your monthly budget and come up with a realistic outlook of your current finances. Then, promptly contact your lender to discuss your financial situation. The sooner you contact the company that handles your mortgage, the better. And being honest about your financial situation is absolutely essential.

If your problems are temporary, your lender is more likely to work with you on a short-term solution. Lenders might agree to wait before taking legal action against you and let you work out a repayment plan that is sustainable for you. Lenders may also agree to spread out the missed payments over a longer term. You can add a small amount extra to your normal monthly payment in order to make up for a missed payment. This is called a repayment plan. Occasionally, depending on your circumstances, your lender might possibly be willing to modify the terms of your loan entirely.

If you cannot make up the missed payments and your lender is not willing to work with you, there are a few other options to stop foreclosure. These include selling your home, considering a short sale, or signing a deed-in-lieu of foreclosure. Short-sales and signing the deed over to the bank both adversely affect credit. Short sales are not quite as bad as foreclosures, however, deed signing has an equally negative effect as foreclosure. Contact your lender to see what they may be willing to do to help keep your home from foreclosure.

Promptly contact your lender to discuss your financial situation

by Leah Knight, Finance writer