Wednesday, April 17, 2013

5 Tips to Avoid Foreclosure

1.      Prioritize!
In order to keep  your home out of foreclosure, you need to make your house the number priority.  We see many cases where a person’s obligations exceed his income, and it is the mortgage that does not get paid.  Instead of missing the mortgage: cancel your cable, quit eating out, and take the bus.   Do you want to keep your house or ESPN?  Want to keep your house or your iPhone?  Instead of paying your credit card bill, pay the mortgage.  But the credit card has a 20% interest rate and late fee!  Well, being late on your house equals losing your home!  Therefore, making the house your top priority ahead of your other creditors and daily luxuries can keep you in your home.
 2.      Savings!
This tip is two fold.  First, just as Dave Ramsey preaches, you should always have an emergency fund.  Dave says when you are cleaning up your debt to put $1,000 in an emergency fund for when disaster hits.  I personally prefer to have at least the $1,000 but if your mortgage payment is $1,200 then make the fund $1,200.  That way you always have at least one month of a mortgage payment ready just in case you will not be able to make it with your current checking account.  
Second part of savings.  If you fall behind on your mortgage payments, almost every bank out there will not accept any payments to catch back up unless it is the full amount including late fees, interest, etc.  Therefore, if you are $3,000 behind, and have $1,500 ready to give to the bank, but they won’t accept it, do not keep it in your checking account.  Otherwise you will see your account with an extra $1,500 and it will be used at the grocery, gas, other bills, etc.  Instead, open up a separate savings account, and place that $1,500 in there.  And then when the next month begins and you will owe another mortgage payment, which will not be accepted, pay yourself the mortgage payment in the savings account.  Therefore, you can catch yourself back up and be ready to pay the bank in full. 

3.      Watch out for scams!
There are a plethora of scammers waiting to pounce on desperate homeowners.  Since the home is almost everyone’s prized possession, we are willing to spend lots of money on the hope of a solution.  A lot of people offer services that will stop a foreclosure, but they end up with the money instead of the bank, and instead of you.  Please be careful.  If you choose to go through a third party to work with the bank on stopping the foreclosure, instead of through bankruptcy, use only HUD approved housing counselors:
 4.      Communication!
Be sure to open all mail you receive from your bank and respond to everything.  The lender might be offering modifications, loan restructuring or other relief options to help you keep your home.  You need to know your rights and options and you cannot do that unless you open all of your mail.  Also, be sure to respond to all of it as well.  Keep a record of all communications.  Also, when speaking to a bank representative or customer service, keep a record of the phone calls such as date, time, person, phone number, and notes of the conversation.  These records can help you in the long run with a future cause of action if the bank does not do what they promised you, so you are not going only from memory and “he said, she said.”

5.      Bankruptcy
Bankruptcy is a last resort option, but filing a bankruptcy will stop a foreclosure and allow you to repay the bank over a three to five year period to get caught back up.  Bankruptcy is a legal way to force your bank to listen to you instead of just ignoring you.  Bankruptcy is not for everyone and you must contact a local attorney to see if your situation warrants filing Bankruptcy.  This is something we have much experience and do regularly.