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3 Key Ways to Stop a Foreclosure

By Brian O’Connell
Losing your home to foreclosure is a nightmare that no one should have to experience.

Category Product: 
Mortgages
Category Finance: 
Personal Finance
Keywords: 
Mortgages, Foreclosure, Home Loan, Home Loans, Housing, Finance, Mortgage, Brian O'Connell
Introduction: 

By Brian O’Connell
Losing your home to foreclosure is a nightmare that no one should have to experience.

But since July 2007, over 1,395,000 Americans have lost their homes to foreclosure.

So how can you avoid joining the ranks of the foreclosed?

For starters, try these three steps to save your home, and possibly your sanity.

Reach out to your lender

In many case, distressed homeowners are so ashamed of their financial situation that they hide the late payment notices under the seat cushions. That’s a big mistake. Your best chance of keeping your home is to work with your lender. That means getting on the phone and finding out what your options are. Specifically, ask your lender about its loan modification, or “workout” plan.  These days all major mortgage lenders have them, so see if you qualify for a renegotiated mortgage. Why? A lower mortgage interest rate, a new repayment plan, or even a reduction in principle, are all on the table.

Write a good hardship letter

Next to your wedding vows, the most important letter you may ever write is your mortgage loan hardship letter. Most lenders these days offer hardship letters included in their loan modification packages. In the letter, lenders are looking for information on your current financial circumstances, how you got behind on your home loan, whether your situation is temporary or permanent, and what you plan to do to get back up to speed on your loan payments. Your lender will also want to see samples of current income (two pay stubs should suffice), tax information for the past two years, and a household budget sheet. Make sure to include an amount you can pay each month while you work your way out of financial trouble.

No Pay Breaks


While you’re negotiating with your lender, keep paying your bills, if at all possible. Mortgage lenders tend to look more favorably on home borrowers who are at least making an attempt to pay their bills. It’s a laborious process, but if you don’t have any money to pay your household bills, call your credit card, utility and phone company, along with any other bill carriers you owe, and ask for forbearance – that’s a mechanism you can use to take some time off from paying your bills while you get back on your feet. To help figure out a minimum credit card payment, use the sbup calculator.

Also, know that mortgage lenders don’t want to foreclose on your home. It costs them big bucks to take the property back, so they’re motivated to work things out. So, use every tool in your financial woodshed to work with your lender, and keep your home.

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But since July 2007, over 1,395,000 Americans have lost their homes to foreclosure.

So how can you avoid joining the ranks of the foreclosed?

For starters, try these three steps to save your home, and possibly your sanity.

Reach out to your lender

In many case, distressed homeowners are so ashamed of their financial situation that they hide the late payment notices under the seat cushions. That’s a big mistake. Your best chance of keeping your home is to work with your lender. That means getting on the phone and finding out what your options are. Specifically, ask your lender about its loan modification, or “workout” plan.  These days all major mortgage lenders have them, so see if you qualify for a renegotiated mortgage. Why? A lower mortgage interest rate, a new repayment plan, or even a reduction in principle, are all on the table.

Write a good hardship letter

Next to your wedding vows, the most important letter you may ever write is your mortgage loan hardship letter. Most lenders these days offer hardship letters included in their loan modification packages. In the letter, lenders are looking for information on your current financial circumstances, how you got behind on your home loan, whether your situation is temporary or permanent, and what you plan to do to get back up to speed on your loan payments. Your lender will also want to see samples of current income (two pay stubs should suffice), tax information for the past two years, and a household budget sheet. Make sure to include an amount you can pay each month while you work your way out of financial trouble.

No Pay Breaks


While you’re negotiating with your lender, keep paying your bills, if at all possible. Mortgage lenders tend to look more favorably on home borrowers who are at least making an attempt to pay their bills. It’s a laborious process, but if you don’t have any money to pay your household bills, call your credit card, utility and phone company, along with any other bill carriers you owe, and ask for forbearance – that’s a mechanism you can use to take some time off from paying your bills while you get back on your feet. To help figure out a minimum credit card payment, use the sbup calculator.

Also, know that mortgage lenders don’t want to foreclose on your home. It costs them big bucks to take the property back, so they’re motivated to work things out. So, use every tool in your financial woodshed to work with your lender, and keep your home.

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