There are a number of mistakes that people confronted with the foreclosure of their homes make that make the unfortunate event more likely. The biggest mistake is not communicating with the lending institution either when you first realize that you're going to have trouble making payments or after you've fallen behind on payments. Most often this unwillingness to communicate with the lender comes from the homeowner's sense of pride or from the belief that the lending institution is somehow the enemy.
As for pride, it's important to realize that there's nothing wrong with asking for help with with financial problems. In fact, there's a good chance that the situation that your financial situation isn't your fault at all. The economy fluctuates and people lose their jobs. Medical conditions and debilitating accidents happen. It's all just part of life.
When it comes to the idea that the lender is the enemy, that's simply groundless. Yes, lending institutions in do get to sell the homes that they foreclose on, and don't give the former owners of those homes any of the proceeds. And, yes they can come after the former owners of homes for the amount that is still owed on the loan that they weren't able to collect by auctioning off the home. But foreclosing on a home isn't something that a lender wants to do, it's just a necessary part of the business. Another way of looking at it is that you entered into an agreement with the lender and if you aren't able to fulfill your end of the agreement, then the lender has to look out of its best interests. Because of the expenses and problems associated with foreclosing on a home- not to mention the fact that the lender stands to make a lot more money from you paying all of that interest for the lifetime of the loan- lenders tend to be very willing to work with homeowners to come up with a way to avoid foreclosure .
What you work out with the lender should be determined by the situation that led to your problems. There are plenty of services available to help you negotiate with your lender for the best possible situation. Some of the options that a professional counselor might suggest for a short term problems, like an injury that prevents you from working for a few months, are forbearance and reinstatement. In both of these scenarios, you and your lender will come up with a plan to postpone payments for a certain period of time and then bring the payments up to date by a set date in the future.
For longer term problems, it might make sense to modify the terms of your loan. In doing this, you might be able to get a lower interest rate, a greater length of time to pay the loan back, or possibly even have part of the loan forgiven. Refinancing with another lender is also a good option. At worst, if you need to sell your house the lender might be able to work with you to keep your credit rating intact in between the time that you recognize the problem and your house is sold. Click here to find out about getting a deed in lieu of foreclosure .
In all, if you act responsibly and seek appropriate professional help, foreclosure is a nasty situation that's fairly easy to avoid.
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