How to Avoid Foreclosure: Tips for Protecting Your Home

How to Avoid Foreclosure: Tips for Protecting Your Home

If you’re reading this, you probably know that mortgage rates have spiked over the last few months making it more expensive to borrow money. This has resulted in increased competition for home loans and stricter lending guidelines for borrowers. To answer the demand for more affordable housing and help keep mortgage rates low, many lenders have raised their minimum standards to qualify for a loan. This means that if your credit score is low or you don’t have a good track record with financial institutions, you’re likely not going to be approved for a mortgage. But don’t worry — there are ways to avoid foreclosure and protect your home while other people scramble to sell theirs at cut-rate prices. We explain what you need to know about avoiding foreclosure below:

Act Now

Many people wait until they fall behind on their mortgage payments to start looking for a way to stop foreclosure. This is a big mistake. Even if you are able to get a loan modification, it will take months to process. In the mean time, you will be paying interest on the full amount of your mortgage. If you are having a rough patch financially, and you can’t manage to keep up with your payments, then you shouldn’t wait until you fall behind to act. You can go to your lender right away and ask to be placed on a payment plan. Most lenders will work with you if you ask for a plan that stretches out payments over a period of time.

Keep Up With Your Payments

It’s critical that you keep up with all of your mortgage payments while you are trying to avoid foreclosure. If you miss a payment, the lender will go after your property and you could lose your home. In fact, if you miss a single payment, the most common response is for the lender to immediately file a case against you to sell your home. If you are struggling to make payments, you should work with your lender to see if there is any way to adjust your payment plan. There may be additional income available to you that you can use to make your monthly payments. You can also ask your lender to reduce the amount that you are paying each month. Alternatively, you can look for other forms of income to help you make your mortgage payments.

Stay Organized

Foreclosure can happen to anyone. But if you take steps now to make sure that you stay organized, it will go much smoother if you do end up in a situation where you are trying to avoid foreclosure. Foreclosure can be chaotic. Many people end up facing foreclosure because they are in the middle of a transition in their lives and they simply have too much going on to keep track of their finances. If this is you, you may want to consider working with a trusted financial advisor to help you stay organized. The advisor can provide you with an overview of your finances and make sure that you are making all of the right decisions.

Get a Good Credit Score

It’s important that you get a good credit score before you are trying to avoid foreclosure. If your credit score is low, you’ll have a much harder time getting approved for a loan. That means you’ll be stuck with a higher interest rate than you would if you were able to borrow from a bank. It’s important that you work to improve your credit score. You can start by paying your bills on time.

Know Your Mortgage Provider’s Requirements

Before you try to avoid foreclosure, it’s important to understand what your lender’s requirements are. This will help you make sure that you are meeting your lender’s requirements so that you don’t miss out on any opportunities to save money through refinancing or other loan modification programs. Each lender has different requirements. You may need to provide proof of income, detail how you plan to make payments if your current mortgage is past due, or show that you have a plan in place to keep your home from being sold if you miss payments.

Stay In Touch With Your Lender

Finally, make sure that you stay in touch with your lender. This is especially important if you are trying to avoid foreclosure. If you fall behind on payments, your lender will likely contact you immediately. If you miss a payment, make sure that you call your lender as soon as possible. Explain where you are coming from. Make sure that you are making payments on time and continuously trying to save money. If you have to take a break because you are in the middle of a transition, make sure to explain this in your conversation with your lender. If you follow these tips, you will be able to avoid foreclosure and protect your home while other people scramble to sell theirs at cut-rate prices.