Some people are worried about being able to keep up with their credit card payments in order to maintain a good credit score. Others are worried about their credit on a much larger scale. Foreclosure rates have reached highs that many of us have never seen before. Many people are panicked, especially those who are facing the possibility of being foreclosed on. I wanted to offer some suggestions to those who may need to look at their options. The sooner you act, the better the chances of saving your home. The most important thing to do is contact your mortgage company. You may not want to deal with the problem, but hiding from your lender will not make it easier. If you do this when you are only one or two payments behind, the lender may not start foreclosure proceedings. Explain to the lender the circumstances that led to your delinquency. Ask them about possible payment arrangements that may help you catch back up. Before they agree to help, you must review with them your current income and expense situation. Be sure to have that ready before calling. While each lending institution is different, here are some options that may be available: Repayment plan You may be able to spread the past-due balance out over several months. Each month, you pay more than the original amount. The extra money is credited toward the delinquent balance until the amount is fully paid. Forbearance The lender may postpone or reduce your payments if you are expecting a large lump sum in the near future. This may be a possibility if you are expecting a bonus or a tax refund. The lump sum would be used to get the past-due balance paid off, and the loan will be considered reinstated. Loan modification The terms of your loan could be adjusted. The lender may allow you to add the missed payments back into the loan balance. They would then recalculate the monthly payment. Another option is extending the payoff date to give you a few extra months on the back end. This option enables you to keep your payment to remain the same. If you know that you can't realistically keep the home, you still have time to act before the foreclosure is started. If you use one of the following options, you may lose your current home, but your credit will be in a much better position to enable you to buy again in the future when things are better for you financially. Sell the home You may ask the lender to postpone foreclosure proceedings while you list your home on the market. Assumption Some lenders will allow another qualified buyer to take over your debt and continue to make the mortgage payments. Short sale You may find that you cannot sell the house for the amount you owe. If you do find a buyer, the lender may be willing to accept the lower amount. The difference would be written off by the lender. Deed in lieu You may be able to voluntarily transfer title back to the lender in exchange for canceling the debt. The lender may want you to try selling the home first. FHA loan If you have an FHA loan, you may be able to get one-time assistance from the FHA Insurance Fund. This is an interest-free loan, but there are strict conditions to be approved. You must be able to prove your ability to pay your current mortgage payment moving forward. One discussion with your mortgage lender may not be enough to resolve the problem. While this may get you caught up this time, you should still analyze the situation to find the root cause of the problem. Once you know the root, you can find a solution to make sure that this does not happen again. For example, you may ask, are there budgeting issues in the household? If so, talk with someone about setting up a budget that will ensure that all necessary expenses are being paid on time each month.
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