Understand Your Options
Keeping your home or leaving your home is your biggest decision of all. Prior to making such a big decision you should fully understand all your options and you should also consult with a foreclosure prevention counselor for guidance. Get started now by clicking on the tabs below to learn more about the foreclosure avoidance options described below.
Keeping Your Home
Loan Modification
A loan modification permanently changes the original terms of a mortgage. Most loan modifications reduce monthly payments, making the mortgage more affordable for the homeowner and enabling them to stay in the home. This option offers an immediate solution to delinquency status with the mortgage company, and is less damaging to your credit score than foreclosure.
Forbearance
Forbearance is when a lender is willing to work with you on payment plan because you are expecting funds from other sources in the near future (such as a settlement or tax refund). Forbearance is a way to get temporary relief until you are in a better financial situation, but you must be able to document the money you are expecting to receive.
Principal Reduction
Principal reduction is when a lender agrees to reduce the principal balance (the amount due) on a home loan to the current value of the property. Homeowners seek principal reductions when their property value has declined and they owe more on their mortgage than the total market value of the home. This is also known as an "upside-down" mortgage loan or being "underwater".
Leaving Your Home
Cash For Keys
If you must vacate your home due to foreclosure, but leave it in good condition, your lender may offer you a lump sum of money. Commonly called "Cash For Keys," the amount varies from lender to lender, but typically ranges from $1,000 to $1,500. You should only consider Cash For Keys if you have exhausted all other options and determined that you will not be able to keep your home.
Deed In Lieu
If you are not able to keep your home or make a short sale, you may be able to "give back" the deed on your property to avoid foreclosure. This pre-foreclosure process of signing over ownership to the holder of your mortgage is called a Deed In Lieu of Foreclosure (meaning "deed in place of foreclosure"). Choosing a Deed In Lieu can be more beneficial than a full foreclosure, as it may not impact as negatively on your credit history and score.
Short Sale
If you're behind on your payments, and your mortgage is substantially more than your house is worth, your lender may agree to let you to sell the house for less than what you owe. The typical requirements to qualify for a short sale are: owing substantially more than the house is worth and having inadequate income due to long-term issues that will make it unlikely you will be able to repay the loan.