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Can I avoid a foreclosure?

Deborah McNaughton, author of The Essential Credit Repair Handbook from Career Press is a nationally recognized author, credit expert and financial coach. She has been in the financial business for over 25 years. In 1984, Deborah found...

How not to get swept under

Who said things are getting better in the housing market? The rising prices of food and gas alone are sending many people into a tailspin. The real estate market still has millions of homeowners who are "underwater" with their mortgages. Even sales are down with potential buyers for new homes. But if you're worried about staying in your home, there are options.

Sad woman going over finances

So many men and women are confused about what to do with their homes. A woman's home is her security, and men feel it too; however, sometimes decisions need to be made on what to do if you no longer can afford keeping your home or making the mortgage payments.

There are other solutions than just walking away from your home and letting it go into foreclosure. These alternatives include:

1Loan modification

Most people have heard of a loan modification. A loan modification means that the lender allows you to change the terms of your original loan which may be a reduction in your interest rate, a reduction in your loan amount or an extension of the term of the loan. If you have tried this already and were rejected, don't give up. Contact your lender and try it again.

2Short sale

If you are considering selling your home, a short sale should be your first choice. When pursuing a short sale, you first have to list the property with a real estate company. Once you have a buyer, the purchase contract, a hardship letter and your financials must be submitted to the lender. The lender must review the purchase contract since it may be less than the balance owed and decide if they are going to approve the sale.

3Short refinance

If your payments are not behind, contact a lender to see if you are eligible for a short refinance. A short refinance, if approved by your current lender, will allow you to pay off your existing loan at an amount lower than the balance. This is based on the appraisal on the property being lower that your balance and the new loan amount your new lender will approve. Take the lender approval letter and copy of the appraisal and submit to your current lender. If they accept this you will now have a lower payment and balance.

4Lease purchase option

A lease purchase allows a buyer to purchase your property for an agreed sales price and date to complete. Earnest money is applied towards a down payment, and you would collect monthly payments. When the date comes to complete the sale, the money collected during the option period will apply towards the deposit and down payment.

5Rental

Renting your house out may also be an option for you. Move into a less expensive home and when things get better and your finances loosen up you can always move back into your original home.

More tips for homeowners

Is your home a security risk?
DIY green home makeover
7 Things to know before buying a home

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