Early Steps to Prevent Foreclosure
You already know a Plan B is important, but what should it include? The first steps to take in creating your plan are to:
Save money.
Put away some money each month to have an emergency fund in case something unexpected happens, such as losing your job. You should have several months of housing costs saved to protect you from unexpected financial problems.Reduce expenses.
Think about where you can save money; for instance, temporarily canceling cable or your gym membership. By paring down to the bare necessities, you may be able to save a significant amount of money. And even if it doesn’t seem like enough of a savings to make a big difference, remember – every little bit helps.
Use our budget worksheet
If you've put your Plan B into action and still find yourself having trouble paying the mortgage, you should:
Call your lender.
This is the single most important thing you can do. Lenders want borrowers, not properties – they would prefer to see you keep your home. Most will work with you while you get back on your feet.Be honest with your lender.
Different situations require different solutions. It will matter to your lender to know if your financial problems are temporary, for example, due to an injury that puts you out of work for a few months, or are more long term, such as a cut in pay or a layoff.Know what you owe.
Have a clear picture of what your debts are and make your mortgage the priority if you have to make choices. Debt collectors can be very aggressive, but if you can't pay all your debts, make sure your home is protected from foreclosure by paying your mortgage.Talk to a housing counselor.
A non-profit housing counseling agency may be able to help you restructure your bills so that you have an easier time paying them. Additionally, they can help you create a budget that suits your specific needs.Contact a housing non-profit.
A housing non-profit can give you valuable advice. The HOPE National helpline, 888-995-HOPE, is dedicated to helping homeowners facing foreclosure 24 hours every day. Spanish – speaking counselors are available.
Making the call...
When you call your lender, be sure to have your account information handy and be ready to give a summary of the financial problems you are having. You should also have recent income statements and your household budget with you.
Be prepared for more than one conversation. Your lender may require that you complete a “loan work-out” package – you may not be eligible for help without it, so complete it as soon as you receive it.
Questions to ask...
- How much time is the lender willing to give you to complete a work-out?
- What are your obligations under the work-out package?
- What are the specifics? Be sure to ask what is due and when.
- Will a foreclosure sale of your property be put on hold while your lender looks at the possibility of a work-out package?
Visit the Mortgage Bankers Association's Foreclosure Prevention Resource Center for advice on calling your lender for assistance.
Finding a credit counselor
You can find a credit counseling agency in your local phone book or by contacting the U.S. Department of Housing and Urban Development (HUD) at (800) 569-4287 on weekdays between 9:00 a.m. and 5:00 p.m. Eastern time. You can find a list of HUD-approved agencies on their Web site.
Know what questions to ask to make sure you find a reputable credit counselor.
Getting debt advice
Talk to a housing counselor at the HOPE hotline (888-995-HOPE) to understand your financial situation and what steps you can take to improve it.