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What Homeowners Facing Foreclosure Need to Know

What are your options when you are unable to keep your payments current on your mortgage or when your home is worth less than you owe?

While foreclosure can be traumatic and a financial nightmare, its impact can be mitigated. In today's tumultuous housing market, hundreds of thousands of home owners are in the same position; and the sheer numbers offers some advantage to homeowners. Banks, struggling under the weight of millions of dollars in foreclosed properties, are eager to negotiate new terms with those homeowners who want to remain in their homes. I have listed several scenarios and possible solutions.

If you do want to remain in your home, contact your mortgage company immediately. Most banks are willing to restructure your loan, and there are many options. Most importantly, you must be able to demonstrate that you have sufficient income to continue paying a mortgage. Begin by creating a personal budget that shows your income and all expenses. You should also research property values in your area. Have prices declined? Are comparable homes selling for less? Talk to local Realtors® and use the internet to gather the facts. If you can demonstrate that your home is worth less than you owe, you may be able to convince your bank to lower the outstanding balance.

Be wary of companies or organizations offering to help you avoid foreclosure. Some are vultures, capitalizing on your misfortune. You don't need to pay a fee for the services they offer; you can do the same thing for free and can get help through,, or Consumer Credit Counseling. Companies offering foreclosure prevention will only take more of the money you'll need to make your mortgage payments.

Don't risk your home to a foreclosure recovery company. Organizations promising an immediate stop to foreclosure proceedings in return for your signature authorizing them to negotiate in your behalf may, in fact, have you sign over the title to your property. Any service they can legitimately provide is available for free, and those offering free help will never ask you to sign such documents.

If you do need to sell, there are options there also. You may be able to negotiate what is known as a "short sale," a sale for less than is owed to the mortgage company. However, it isn't as simple as just asking the bank to take less. There are specific requirements that must be met. For more, read: What is a Short Sale?

Finally, whatever your choice, do your homework first. Creating a budget and organizing your finances will let you know if you will be able to continue paying a mortgage and will impress lenders. Then, research your options. Knowledge is power. Seize your power by studying the market, your personal financial situation, and understanding what program best fit your needs.


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