The prospect of losing your home could be quite an overwhelming and sad situation for any homeowner, but is now increasingly common with many homeowners who are unable to pay the mortgage payments. The reasons for not being able to make the payments can be anything from losing a job to an unforeseen medical emergency. Foreclosure, though, can be avoided if action can be taken promptly and initiate one or more specific steps which we will discuss in this post.
In the event that lenders deem it is necessary to go ahead with a foreclosure, they issue a standard notice called as a Notice of Default (NOD) when you already up to 60-90 days due to pay the mortgage. Failure to make payments will automatically lead to the foreclosure which is incidentally expensive for the lender to follow through and use. Hence, lenders always look to see if you could utilize one of the many options available for you to work on and settle for something better than a foreclosure – better for both the parties. Here are some of those options:
Partial Loans
By availing a partial loan from a mortgage company, homeowners can have access to interest-free loans which needn’t be paid until the homeowner is able to make the first few mortgage payments off or liquidates the property in a sale.
Forbearance Plan
In a simple act of giving you more time to consolidate your finances and help you make the necessary payments, at its simplest level, lenders might just agree to forbear some time. This can give you some time to raise cash and arrange for alternative funds.
Repayment Plan
Yet another way, lenders can think of getting their missed mortgage payments back is to divide the total sum of missed payments and have you pay it in increments in each month. For instance, if you owe $3000 until now, it can be divided into 12 installments of $250 each. These little installments can be paid along with the actual mortgage payment. This allows you to catch-up with your payments in case you’ve missed them.
FHA Secure
The FHA has a few programs on its shelf which can be used by a homeowner to prevent foreclosure. FHA secure, one such program, grants FHA insurance for a loan picked up from an FHA approved loan vendor. This allows the homeowner to pick up an additional, loan which he could use to pay up the mortgage payments he missed.
Interest Rate Modification
Since the increase and decrease of the mortgage payments primarily occurs due to the maddening fluctuations of the Interest rates, especially in the case of adjustable- rate loans, lenders might consider locking the interest rate at which the rest of your mortgage payments have to be made. This helps when interest rates fluctuate too much or when there is economic uncertainty.
Debt Forgiveness
Allowing you to scrap all the pending payments and then let you start paying from now on – a rather rare occurrence but still a possibility, depending on many factors of course – is a wonderful option if you manage to get it, that is. This really depends a lot on the lender, your relationship with the lender and needless to say, your credit history.