If you’re in danger of foreclosure, this blog post on foreclosure prevention is for you. This can be a stressful, scary time. You might have lost your job. You might have emergency medical bills or other new financial challenges. Your house might not be worth as much as you originally paid for it. Maybe you don’t know how you’ll pay your next mortgage bill.
Whatever the problem is, you definitely want to avoid foreclosure, especially if it’s a VA foreclosure. Foreclosure can really hurt your credit options in the future. Let’s talk about ways to work with your lender and other parties to make sure that doesn’t happen.
There are more than 11 tips below, so you’ll be sure to find one or more to fit your situation.
Working with Your Lender
First, as soon as you’re in a situation in which you might start missing mortgage payments, go talk to your lender about it. You need to find out as soon as possible if your lender is willing to help. If not, you can move on to other options right away.
Your lender actually doesn’t want you to go into foreclosure because it’ll cost them. It’s easier for them to work out an alternative plan with you than to worry about a foreclosure. So ask them for help!
The first option your lender might explore is giving you a repayment plan if you have to miss a payment or several payments. Under this plan, instead of going into foreclosure you’ll make regular mortgage payments and pay a little extra each month in order to gradually pay off the payments you missed by a certain date. Your lender will decide the terms and length of the plan.
A different form of that type of plan is called a “special forbearance”. Your lender can give you a due date by which they need you to pay back all your missed payments. The difference is they won’t make you stick to a structured plan, and that’ll give you more flexibility. You might pay nothing one month and a lot another month.
One of the best deals your lender might offer is a modification of the loan, which is similar to a refinance. You almost get a clean start, because the lender adds your missed payments to the total of the loan and gives you a new payment schedule. You can resume monthly payments like normal. This can be a huge relief when you otherwise don’t see a way to catch up on back payments.
There are a few other ways your lender can help. First, they might give you time so that you can put together a private sale of the house. They won’t start a foreclosure while you’re finding the buyer and processing the sale. Second, they might agree to a short sale in which the house is sold and the lender accepts less than what you owe but still settles the debt. Third, your lender might accept the deed to your house instead of the payment of the mortgage. In that process, you’ll lose ownership but avoid a foreclosure.
Help from the VA and the SCRA
If you have a VA loan and your lender doesn’t want to help you or can’t think of a way to help, you can turn to the VA. Contact a Regional Loan Center of the VA. Your Loan Technician will talk you through all the different possible solutions to help you avoid VA foreclosure. He or she can also talk to your lender on your behalf and may be able to find a solution with them.
The Servicemembers Civil Relief Act (SCRA) is a US law that can help you if you’re a current military servicemember on active duty or a National Guard or Reserve member on active duty. Coverage begins when your active duty starts. Under the current law, you’re still covered for up to a year after your discharge from the military.
SCRA prevents your lender from foreclosing on your home while you’re away on active duty (except through a special court order). It can also prevent your mortgage interest rate from rising above a certain level. Also, it won’t hurt your credit score if you miss payments while you’re protected.
Five More Tips to Avoid Foreclosure
If the tips above don’t fit your situation, or you just want to try other options, here are five more that can help you with foreclosure prevention.
Get Financial Advice
You can make a plan with a professional financial advisor. An advisor might see options that you haven’t thought of. They can help you use extra money in your budget or untapped resources to make your monthly mortgage payments. You may even have a family member or friend with this level of expertise who’d be willing to help you.
Borrow Money from Private Sources
You might be able to borrow the money you need to make your mortgage payments on time from a friend, family member, or someone else you know well. It’s best if you’ve already built a high level of mutual trust with that person. He or she may be more willing if you explain your concrete, realistic plan to earn the money to pay him or her back, such as a quick path to a new job.
Refinance Your Home
It might be easier to refinance your home than to go through other options, such as trying to get your lender to restructure your mortgage. You may even end up with a lower interest rate and lower payments, especially if you switch to a VA loan from a conventional mortgage. You can talk to Low VA Rates about getting a VA refinance loan.
Sell Extra Possessions
If there’s no more room in your budget and you still can’t make your mortgage payments, you might sell some of your possessions that you can bear to part with. That might give you enough to cover a payment or a few payments. It might be easier to live without those things than to go through a conventional or VA foreclosure.
Consider Selling Your Home
If you haven’t already thought about it, at least keep this option in mind. You might think there’s no other choice than to keep struggling with your mortgage payments. Maybe you can’t imagine selling or moving right now.
It wouldn’t hurt to at least find out how much you might be able to sell your home for. There’s a possibility that you might end up with more money than you think. Maybe you could use the money to buy a less expensive house with easier payments.
We hope that at least one of these tips can help you with foreclosure prevention. If you’re stressed out, know that you’re not alone. Many people would like to help—maybe even your lender! If you want more information on how a VA loan can help you, please contact Low VA Rates.