Even if you've fallen behind on your mortgage, it's still possible to avoid foreclosure.
- If you've recently suffered a significant hardship--such a divorce, job loss, or medical crisis--and your mortgage payment is more than 1/3 of your gross monthly income, you may be eligible for a loan modification through the Obama administration's "Making Home Affordable" program.
- In addition, contact your lender to inquire whether they would consider modifying your existing loan. For example, lenders can assist homeowners by lowering interest rates, extending the terms of the loan, or by reducing the principal on the loan. In many situations, these types of accommodations are actually less costly to the bank than foreclosure proceedings.
Perhaps your mortgage payment is currently up-to-date, but you anticipate falling behind in the future, due to income and/or child support reductions. To further complicate matters, dropping home values may prevent you from being able to sell your home for more than you currently owe the bank. This is called being "upside down in your mortgage."
- Consider refinancing through the Obama administration's "Making Home Affordable" refinancing program.
- Be cautious when considering "no closing costs" refinancing options, which tack the closing fees onto the balance of the loan. These programs typically cost the borrower more money over the life of the loan, but if it helps you avoid foreclosure at this point, the extra expense may be worth it.