Your Foreclosure Alternatives- By: Sonia Smith
With the alarming foreclosures at a 30 year high, more and more people are losing their homes in a harsh way. Many reasons lead to the high level of homes in foreclosure such as losing jobs, unstable stock market and the increasing amount of home costs. If you are behind on your monthly payments, consider some options to a foreclosure.
A foreclosure could lead to a hostile credit and financial hardships and it would be very hard to obtain a mortgage later on, if you have a history of foreclosure. Thus, it is a relief to know that there are alternatives to foreclosures that you can choose.
The following are several foreclosure alternatives to consider:
- A Special Forbearance is when the lender may temporarily reduce or suspend your payments for a certain time. At the end of the term, you have to make a lump sum payment or enter a long-term repayment plan to pay back the lowered amount. Forbearance could be a good option if the reason for your default is specific and temporary and it is reasonable to continue to make payments at the end of the forbearance time.
- A Repayment Plan is where the lender may arrange a simple repayment scheme where you have to make your payments and the total amount of default. It could be several months or up to one year. At the end of the period, you would have already paid your past due and your payments will resume to the original amount. This could be a good choice if the reason for your default is solved. For example, your default could be caused by unemployment for a certain period but you are now employed again.
- The Mortgage Modification is refinancing your debt and extending the loan term of your mortgage. This allows you to catch up on your mortgage by lowering the monthly dues to a more affordable one. You may qualify for this if you have recovered from financial problems but your income is less than it used to be before the default occurred.
- A Partial Claim is when your mortgage lender works with you to obtain an interest-free loan from HUD to get your mortgage current should you qualify.
- A Pre-Foreclosure Sale is selling your home to pay off your mortgage to avoid foreclosure and damage to your credit standing. If you are unable to afford your home long-term, you could it before a foreclosure sale and save some of the equity of your home.
- A Deed-in-lieu of foreclosure is your last option, which is to give back your home to your mortgage lender. This does not save your home, but may be able to help your chances of getting a new mortgage later.
If you want to know if you qualify for these foreclosure alternatives, you can join a free foreclosure counseling which is available through funding from the state. You can talk to a counselor to help you find out if these alternatives are the right ones for you. Keep in mind, a foreclosure could be avoided so long as you are able to find ways and work on it immediately.
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