5 Ways to Avoid Foreclosure

Foreclosures are on the rise. It's reported that Forclosure Filings are up 93% this year. A lot of people got in trouble when they purchased a home a few years ago when the markets were crazy. They chose Adjustable Rate Mortgages (ARM) and the interest rates on those loans fluctuate after a few years at a fixed rate. With those interest rates rising, some homeowners find themselves unable to keep up with the mortgage payments and facing foreclosure. Here are 5 ways to possibly avoid foreclosure.

1. REFINANCE- You can refinance to a fixed rate mortgage to get out of the ARM loan with a high interest rate. This is an easy thing to do, but not everyone can do it because you do have to come up with money for closing costs. This tactic has saved many people from foreclosure.

2. MORTGAGE RELIEF- If you don't have the money necessary for closing costs so you can refinance then there is something available called mortgage relief. Call your lender as soon as you feel you can't keep up with the mortgage payments and they might extend the foreclosure period for you. Usually a home is foreclosed on if the homeowner is just 3 or 4 months behind on mortgage payments. If you are up front with the lender and ask about mortgage relief, you might get a few extra months to get back on your feet.

3. FORBEARANCE- This is where you don't have money to make your house payments so the lender will let you not make payments for a few months. This sounds great, but you are still accruing interest on the loan.

4. LOAN MODIFICATION- Loan modification can be done if you are 30-120 days late on your mortgage payment, but you have a good credit score. You can call your lender and ask them about modifying your loan. They might work something out to where they lower your interest rate or they extend the years on your loan so that your monthly payment is lower.

5. SHORT SALE- This is usually the last and final option. It usually happens when someone bought a house with no money down and since the market has changed some and they now have a high interest rate ARM, they actually owe more than the house is worth. The bank will let you sell the house for less than it is worth and they will forgive you of the rest of the loan. Instead of the bank incurring all those costs of foreclosing they will actually take money off of the loan. You are still required to pay taxes on the difference of the loan, but sometimes this can be a lifesaver to someone who is really in over their head.

If you feel that you might not be able to pay your mortgage, call your lender and discuss some of these options with them so that you can possibly avoid foreclosure.