How To Avoid Foreclosure

Reduce Your Monthly Mortgage Payment

Most Americans, more than ever, are facing foreclosure and the amount is still rising. If you are facing foreclosure, you should know that there may be several options to try before you lose your home. Investigating these options is worth it when you are in financial dire straits. As well, bear in mind that the first time you miss a payment and let it lapse for a small while; you are on track for foreclosure. Educating yourself about the following options so you can take action and save your home.

The first option to avoid foreclosure is to refinance your existing loan. If you have good credit and your loan was obtained when interest rates were higher you may be able to refinance your loan at a lower rate. The refinanced loan will have lower monthly payments. These lower payments may help you stay on top of your debts better. If you have equity built up in your home, you can use that equity to pay off other debts with higher interest rates, like credit cards. Now, when you get a reduced mortgage amount per month, the best thing to do with the savings is to also pay down any credit card debt or to apply the savings back into your mortgage payment every month.

If refinancing isn’t an option, your mortgage lender may be able to help you with a loan modification. With this tactic, your lender and you will enter a new contract with different terms from your old contract. The amount of the loan will stay the same but the length of the loan, interest rate or type of loan may change in your favor. For example, moving from a 15 year variable interest rate mortgage to a 20 year fixed rate can lower your payments and save you money in the long run. Always talk to your mortgage lender prior to talking with a loan modification company – most loan modification companies are not able to perform on a promise and some make you sign paperwork acknowledging that – be leary about any “great deal” being offered.

If neither of these options works for you, there are still options available. The Federal Housing Administration (FHA) offers free financial counseling. Simply contact the FHA and see if there are counselors in your area. If there aren’t you should be able to get counseling over the phone. The counselor will go over your financial paperwork and advise you on programs in your state or city that can help you avoid foreclosure.

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