What to do instead of waiting for a notice of foreclosure
Homeowners in foreclosure who end up in my office are rarely surprised by their predicament. Most expected it for some time, but did nothing. This is a horrible mistake. If something happens and you know you will not be able to make your mortgage payments, you do have options. But if you don’t take action quickly, you may lose them.
First, of course, if you cannot make one mortgage payment, you will probably have difficulty making two, three, or more. This is probably a good indication that you should try renting again. It may be time to put your house on the market.
Selling is not the only option, however, if it is a near thing, you should pay what you can, while you can. Few lenders will foreclose if you are making a good faith effort to pay. Don’t do this merely to forestall foreclosure, however. Do it only if you need a bit of a break for a month. The better plan is to contact your lender or loan servicer and tell them that you are going to default on your loan. They should be willing to accept lower payments for a period of time, or you may be able to refinance your loan.
Whatever you do, be sure you confirm it in writing. If you don’t, you have no proof of the agreement’s existence.
In the end, if you can’t afford your loan, it is better to find this out early on, and to sell your house to pay off the loan.
[...] does not mean that walking away and gleefully living “payment free” is the solution. The responsible solution is to refinance, negotiate a lower rate, or sell the house. If none of those things work, then the bank may foreclose if it [...]
I don’t think that home owners are not looking for an easy - how can I screw the bank - plan. A lot of us bought in at the height of the housing boom and now we are watching our houses SINK daily. We bought our home for $350. If we put it on the market, we wouldn’t be able to sell it for $270. So every month we are dumping money into a sinking ship. Banks won’t refinance your loan or lower payments if you aren’t deliquent several payments and about to lose the house anyway. We try SO hard to keep up on payments. We have perfect credit. We are putting gas and food on CC every month. Banks won’t help us, we can’t sell - what other option do we have besides just walking away.
By the way, we have had perfect credit in the 790’s-800’s our entire marriage and it has never gotten us any breaks, better interest rates - NOTHING. However my sister and best friend who both foreclosed on their homes and claimed bankruptcy are back into a house less than 2 years later + at the same intrest rates that we got. It makes me mad and makes me think that maybe credit is just a fraud to keep us scared… What has it ever been good for?