Refinance Your Home
If you see the ugly face of foreclosure leering back at you and want to avoid foreclosure as best you can, one option you have is to refinance. Refinancing can lower your monthly payments and make them more affordable. And if you have an ARM (adjustable rate mortgage) and the interest rate just skyrocketed, refinancing can get you a fixed rate loan and help you get a handle on that interest rate.
Forbearance
This is a special instance that applies to those who have had medical emergencies, loss of employment, or other hardships that have lead to mortgage payment delinquencies and possible foreclosure. Basically with forbearance, you work with your lender to arrange a repayment plan that you can manage based on your hardship. You need to request and apply for forbearance with your lender before it can take effect. Often you'll be asked to show proof of this financial burden and then the bank or lender will make a decision.
Extend the Terms of Your Home Loan
You can talk with your lender about extending the terms of your loan to help ease the monthly payments. This is another situation where you need to make a strong claim for the need to extend your terms and could result in a refinance or forbearance.
File for a Loan through the U.S. Department of Housing and Urban Development (HUD)
The Department of Housing and Urban Development aids low income households in acquiring funding to purchase homes. The type of loan they typically offer is interest-free and can help you bring your mortgage payments current. You must first apply for and qualify for aid through HUD. Qualifications include:
1) Home loan needs to be only 4 to 12 months delinquent
2) Your home can't be in foreclosure
3) After you've paid off what's past due, you need to be able to resume full mortgage payments.
For details visit the
U.S. Department of Housing and Urban Development website.
Put Your House up for Sale and get it Sold Prior to Foreclosure
If you want to avoid foreclosure, you can simply put your home up for sale and get it sold before you fall into foreclosure. True you still lose your home but at least you don't have a foreclosure listed in your credit report.
File for Bankruptcy
Filing for bankruptcy is one way to avoid foreclosure, but it's not the best. This is a last chance scenario. You basically have two types of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy freezes your assets meaning you can't buy anything. It does mean that the bank can sell off (liquidate) your assets to pay back what is owed. Luckily you still get to keep your home. You just lose a lot of "stuff"
Chapter 13 bankruptcy doesn't freeze your assets but rather discounts what you owe for pennies on the dollar and readjusts your payments so the new amount is paid back. As long as you stay on top of all your new payments, the bank won't go after your home and other property. Both chapters of bankruptcy are options when it comes to avoiding foreclosure.
Give Your Home Back to the Bank (deed in lieu of foreclosure)
If foreclosure is at your door, one option you have is to give back your home to the bank. You do lose your home but you do avoid foreclosure. It's not the best way to avoid foreclosure but it's better than going through the entire foreclosure process.
Give in to Foreclosure
Your absolute last options isn't really a way to avoid foreclosure. It's simply giving up. You need to try everything you can to avoid going into foreclosure. This is the end of the road.
No one wants to go through foreclosure. It's a horrible experience that results in emotional pain, loss of dignity, and of course, loss of your home. Do everything in your power to avoid foreclosure and save your home.