There are a lot of ways you can slip into financial trouble with your home, maybe you got laid off, or experienced some other kind of setback – life happens, after all. You miss one payment, and then another, and before you know it you’re three months behind and the bank is at your door. No one wants that, not you or the bank – here are 3 things you can do to avoid a foreclosure.
#1 Fixed-Rate Mortgage
If you have an adjustable rate mortgage, why not refinance to a fixed-rate mortgage? If a fixed-rate mortgage is currently at a lower interest rate than a fully indexed adjustable rate mortgage, simply refinance to keep the rising rates away from your home and out of your checking account.
Once you’ve let your lender know what your situation is, you could look into forbearance. Forbearance is a special agreement between the lender and the borrower to delay a foreclosure. The literal meaning of forbearance is “holding back.” You don’t have the money to make your payment so they charge you the interest rate you would be owing on that mortgage payment instead. This doesn’t mean you’re living in the house for free but they might give you a few months where you don’t have to make the full payment.
#3. Loan Modification
This is only allowed for people with good credit scores but have found themselves 30 to 120 days late in payment. Call the bank and they may modify your loan. Maybe give you lower interest rate, extend your payment period, make some modifications so you can stay in the house.
The Minnesota Association of REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.