Pre-Foreclosure - Very Important Tips

All is not lost when it comes to protecting yourself from foreclosure. Here are the steps that you need to follow to protect yourself from the foreclosure process. Keep in mind that once your lender has expressed his or her plans to foreclose on your home, your time is extremely limited. This is a fast moving process, and because time is of the essence, you have to act fast if you want to succeed.

1. For starters, do not ignore the problem.

As you become further and further behind in your finances, the more difficult it will become for you to reinstate your mortgage loan. The harder it becomes to reinstate your mortgage loan, the more easily your lender will find it to take your home from you.

2. Contact your lender as soon as you know that there is a problem.

Nothing dictates that you have to wait until your lender plans to foreclose. In reality, lenders do not want your home; they would rather you simply paid your mortgage on time so that they can be paid back for their investment. Because of this, most lenders offer options to help borrowers through a number of different financial difficulties.

3. Keep in touch with your lender in every step of the process.

Open and respond to any and all mail from your lender, because the first notices that you receive will offer a lot of vital information regarding the foreclosure prevention process. By failing to keep in touch and to open the mail that your lender sends simply will not be a good enough excuse when you finally end up in foreclosure court.

4. Know your rights and your options when it comes to foreclosure.

You can find a lot of valuable information relating to foreclosure prevention or loss mitigation online. Make sure that you know your rights, as informed decision making is the best way to prepare yourself for this challenging process.

5. Use your assets to the best of your ability.

Do you have assets like jewelry, a second vehicle, a whole life insurance policy, or other types of assets that you can use to sell for cash? Selling items that you can bear to part with will allow you to reinstate your loan. Using your assets to the best of your ability can have a huge impact on your ability to repay your mortgage and to save your home.

6. Avoid companies that charge money to do what you can do yourself.

You should never have to pay exorbitant fees for help with foreclosure prevention. Use that money to pay your mortgage off instead. For profit companies will contact you with a variety of wild claims regarding negotiating with your lender, but they are doing this hoping that you do not realize that you can negotiate with your lender all on your own without their help and overpriced services. These may be legitimate companies but, there is nothing that they can do which you cannot do yourself, and your lender would more than likely rather hear from you than a professional company when it comes to your mortgage loan.

There are a variety of options available to you that do not require you to lose your home. With so many alternatives, it seems ludicrous that so many people find themselves losing their properties to a completely avoidable.

Re-Negotiating the Loan:

This option would allow you to use the equity that you have already established in your home as a way to pay off the delinquent amount in your current mortgage loan. Your monthly payments may even be reduced, but this depends on the interest rate of your new loan.

Modifying the Terms of the Loan:

An option like this will allow you to refinance the debt in your mortgage, or even to extend the current term of your existing mortgage loan. Modifications are changes that are made to a mortgage loan without having to refinance.

Developing a Workout Plan:

Developing a repayment plan typically involves establishing a new schedule that allows you to make full regular monthly payment plans to your lender plus a little bit of extra money every month so that you can repay the delinquent amount that you owe over a pre determined amount of time.

Forbearance:

Special forbearance plan options may give you a temporary reduction or a temporary suspension of your monthly mortgage payments, based on the lender's ability to later increase your payments at a point where you are more financially stable. The increase in your payments will cover the delinquent amount that was accrued. There are also options available that allow you to dispose of your home to avoid the foreclosure process all together. While losing your home all together is not always an ideal situation, it is a viable option and therefore is well worth exploring.

In situations where you do not have interest in retaining ownership of your home, the following disposition options may be available to you as alternatives to the foreclosure process. These options will affect your credit rating a lot less than the foreclosure process would.

Sell the Home:

If there is a sufficient amount of equity in the property, you could actually receive more for the property than what is currently due on the mortgage loan, allowing you to pay the mortgage off and to walk away with some cash in your pocket as well.

Assumption:

Using this option, what you would do is to sign the property over to another person who would take over the possession of your home, and would handle making the payments from that moment forward.

Pre-Foreclosure Sale:

This option, which we will touch on more in the next chapter, will allow you to sell your property for less than what is necessary to pay for your mortgage loan.

Deed in Lieu of Foreclosure:

This option may allow you to "give back" the property to your lender voluntarily, without damaging your credit further than you already have. If you do decide to sell your home, because time is of the essence in the foreclosure process, you need to be quick about it. While you may not necessarily fetch a lot of money for the property, to avoid foreclosure it is important to accept what you are offered in many cases.

Your luck in this situation may lay in the fact that there are many savvy investors out there who are looking to buy properties for decent amounts of money in the pre foreclosure and foreclosure phases. Homes that have been defaulted on still often have equity in them, and this equity can be extremely valuable to the right investors. If you are having difficultly working with a real estate agent that has what it takes to quickly sell your home, you may want to start looking for investors who pay cash for homes that have been defaulted on or pushed into the pre foreclosure phase.

While it is not a good idea to have to give your home up, in some circumstances the only way to protect yourself from foreclosure is to pay the entire mortgage loan off quickly by unloading your house to the first investor who offers you a good deal. If you wait and the lender takes your home, you will not only get far less for it than you deserve but may also end up owing money to the lender.