Foreclosure is generally the least favorable option for a homeowner. It causes you to lose any equity in the home. If the home is sold for less than the mortgage balance plus any fees, you could still be liable for the difference. In addition, you will have the equivalent of a black eye on your credit report, although this one won't heal for up to seven years. Furthermore, you would still have to pay for another place to live. Several rental communities pull a credit report which can make it hard to live where you want to with damaged credit.
If you are facing the prospects of foreclosure, it is important to first know the steps to foreclosure. You will need to have some idea of what to expect in the process as well as to estimate how much time you have to avoid foreclosure altogether. If you need help, consider meeting with a certified housing counselor. You may find that you have more options than you think.
No one wants to lose their home, and you should make every reasonable effort to keep your home. If you determine that you will not be able to keep your home, make arrangements to escape your mortgage payments without going through foreclosure. Selling your home can allow you to cover the mortgage balance, avoid foreclosure and the negative credit associated with it and recover any equity that you have in the home. If you cannot afford to keep your home, selling it can often be the best alternative to foreclosure.
A short sale may be one possible way to mitigate the damage when you can no longer afford your home but have negative equity. This special situation requires lender approval. Additionally, a short sale can cause substantial damage to your credit. It is likely that your credit has already been impacted in a major way if you are late on house payments.
If you plan to keep your home, it may be possible to obtain a mortgage loan modification. This could lower your interest rates and payments if you meet the eligibility requirements that modifications demand. Alternatively, a special forebearance could be what you need to restore current payment status without having to make up the arrears.
Your home and automobile payments are secured debts that are more important than unsecured debts such as credit cards. If you do have high unsecured debt, perhaps credit counseling can provide options for reducing your unsecured debt payments, thereby leaving you with more money to meet your secured debt obligations.