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60-Second Guide to Avoiding Foreclosure

Posted by  on Apr 01, 2010
 

If you're struggling to keep up with mortgage payments, join the crowd. About 13% of U.S. homeowners are either behind on their mortgage loans or in foreclosure, according to recent figures from the Mortgage Bankers Association (MBA). So what can you do if you're in a bad financial situation and need help?

  1. Refinance your mortgage. Current mortgage rates are averaging approximately 5% for 30-year loans, so if you still have equity in your home, refinancing could be a lifeline. Get free, no-obligation mortgage quotes here.
  2. Cash out non-retirement investment accounts and use the proceeds to catch up on mortgage payments. Yes, it's important to grow wealth through investing, but if you can't pay your bills you have no business investing in the stock market.
  3. Ask your mortgage loan servicer to modify the terms of your loan. It may take several attempts to get through to someone because mortgage lenders have been bombarded by calls from troubled homeowners. Visit the Making Home Affordable site to get details on the government's mortgage rescue plan that includes refinancing and loan modifications.
  4. Sell your home. This may be your only option if you can't make your mortgage payments. Don't expect to sell your home overnight, however. According to the National Association of Realtors there was an 8.5 month supply of homes on the market in August.
  5. Consider a short sale. That involves convincing your mortgage lender to accept less than you owe on your home. Be prepared to provide all documents when requested and line up a strong buyer.

What's Contributing to Mortgage Loan Delinquencies?

While sub-prime adjustable rate mortgages (ARMs) were blamed for foreclosures early in the recession, people with prime fixed-rate loans are now increasingly troubled. "As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts," said Jay Brinkmann, MBA's chief economist, in a statement.

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