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How Do I Avoid Foreclosure?

How Do I Avoid Foreclosure?

There are number of different reasons why individuals can no longer make a monthly mortgage payment. Job loss due to layoffs and downsizing or overwhelming personal debt for medical emergencies can put a strain on limited financial resources. Regardless of the reason, the end result may still be the same, not enough money for too many obligations. One of the worst things to stop making payments on is a house since foreclosure leads to eviction which can lead to homelessness. If you're asking yourself, how do I avoid foreclosure, take a look below for some additional information and steps you can take.

Contact Your Lender

When a financial institution, such as a bank or credit union, extends a mortgage to an individual they are doing so to make money for themselves. Like any other type of loan the lender charges a percentage, such as 5%, for you to buy a home or automobile and pays depositors 1% or less on the funds they are using for loans. The financial companies make money on the difference between what they pay and what they charge for the money going through their operation. It is in a bank or credit union's best interest for you to keep making your monthly mortgage payment by any means necessary. One of the tools they have is called a forbearance which can temporarily suspend mortgage payments until a borrower gets back on their feet financially. They may also renegotiate the terms of the loan to lower interest, convert a mortgage from an adjustable-rate to a fixed rate, or allow the owner to participate in a short sale on the property. Contacting your lender can be the best thing you can do to avoid a foreclosure.

Consolidate Resources

Many individuals and families which may be financially strapped often have access to more funds than they may think. Getting part-time jobs to supplement already limited income is sometimes all that is necessary to get over a bump in the road financially. Eliminating wasteful spending and selling personal property such as extra furniture or sports equipment you no longer use can sometimes result in hundreds of extra dollars per month. Renting out a room in the home to a friend or family member can also lower the monthly mortgage enough that you are able to start paying your loan again. It is important to think outside the box and consider all options when generating income or eliminating expenses all of which can help avoid foreclosure at least in the short term.

Declare Bankruptcy

Many states offer "Homestead" protections when declaring bankruptcy which is meant to prevent a loss of a primary residence. This doesn't necessarily mean you can avoid foreclosure but it is a legal means to deal with the foreclosure process and protect yourself and your property. Some bankruptcy laws in various states also protect a primary vehicle as well as a home with the purpose being to avoid homelessness and increased unemployment in those states. If a person has a car and a place to live they statistically have a higher chance of obtaining gainful employment and start making payments on unsecured loans again. If you're in this situation consult with an attorney so they can explain your rights under the law when it comes to avoiding foreclosure and protecting your personal property.

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