What is Foreclosure?
Missing mortgage payments may mean you lose your property; in a word, it means foreclosure is likely. Foreclosure means that the lender takes possession of your home and sells it in order to get its money back. Technically, foreclosure is the legal process that takes place when this happens.You do have options, however. According to the U.S. Department of Housing and Urban Development (HUD), working with your lender and possibly a housing counseling agency is the thing to do.
You may be able to get:
- Special forbearance - This means you may be able to set up another repayment plan with your lender that will fit your financial situation. Sometimes, if you've recently lost your job or another source of income, you may find that your lender is willing to temporarily reduce or suspend your payments.
- Mortgage modification - If you are recovering from some financial problem and now have an income level lower than it was before, you may be able to either refinance what you owe or extend the term of the loan.
- Partial claim - You may be able to get an interest-free loan from HUD in order to get your mortgage current. This option has special qualification criteria.
- Pre-foreclosure sale - If the appraised value of your property is at least 70 percent of the amount you owe, then you may be able to sell the property in order to pay off the mortgage. The sale price has to be at least 95 percent of the appraised value, and there are other requirements in order to qualify.
- Deed-in-lieu of foreclosure - Because foreclosure damages your credit, you may be able to "give" your property to your lender in order to avoid the credit problems associated with regular foreclosure. Again, there are requirements you must meet in order to qualify for this option.
