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How to Survive a Foreclosure: Tips for Maintaining Your Financial, and Emotional, Well-Being


by: Jessica Santina
01 Dec 2010

The average homeowner knows very little about the the mortgage business. That, coupled with fear over the economy and the media frenzy surrounding it, has perpetuated many misunderstandings about the foreclosure process. Many homeowners struggling to make payments simply don't understand what options are available to them or don't get the support they need.

Foreclosure May Not Be Necessary: Learn Your Options

Believe it or not, lenders are not champing at the bit to take your home. The average foreclosure costs a lender $58,000, so it benefits them to keep homeowners where they are. You might be able to avoid losing your home by taking the following steps:

  1. Act quickly. As soon as you realize your payment will be late or missed, contact your lender about your options. A mitigation department may even be able to work out an affordable payment arrangement.
  2. Know your rights. Read your loan documents to understand what lenders are legally able to do if you miss a payment.
  3. Watch your spending. Aside from health care, making your house payment should be your top financial priority. Delay payments on unsecured debt, like credit cards, and look for any unnecessary spending that you could eliminate, like cable bills or gym memberships.
  4. Consider Home Affordable Modification. Part of the Obama administration's Making Home Affordable plan, this program streamlines the process of modifying existing mortgages for homeowners who meet a set of conditions. Contact your loan servicer to find out if you qualify.
  5. Call The Home Ownership Preservation Foundation. This independent nonprofit organization provides HUD-approved counseling that might help. Do this as soon as you can.
  6. Consider alternatives. A short sale or deed in lieu of foreclosure may help you to avoid the time-consuming process of foreclosure, and could even help spare your credit. Talk to your lender about these options.
  7. Don't get scammed. Foreclosure counseling should always be free, so don't let anyone prey on your fears by promising a quick fix.

Know You'll Survive, No Matter What

As if the financial burden of foreclosure weren't enough, the fear of losing your home and the accompanying feelings of guilt and failure can take a tremendous toll.

Remember that it's not just you: More than 13 percent of mortgages are in foreclosure or past due at the time of this writing. Don't let shame or embarrassment prevent you from taking the situation into your own hands, being honest with your lender about your situation, or asking an expert for help. Take a proactive approach, and you're almost guaranteed to better your situation.

Sources:
David M. Kinchen • Mortgage Bankers: Q2 2009 Residential Loan Delinquency Rate Sets Record • Aug 21, 2009 • http://www.huntingtonnews.nethttp://www.huntingtonnews.net/columns/090821-kinchen-columnsmortagebankers.html • HuntingtonNews.NetTips for Avoiding Foreclosure • http://www.hud.govhttp://portal.hud.gov/portal/page/portal/HUD/topics/avoiding_foreclosure/foreclosuretips • U.S. Department of Housing & Urban DevelopmentSusan Taylor • Getting Through Tough Times: Common Myths About Foreclosure • Jun 02, 2009 • http://www.extension.orghttp://www.extension.org/pages/Getting_Through_Tough_Times:_Common_Myths_about_Foreclosure • University of Nevada Cooperative Extension, "Getting Through Tough Times"