Foreclosure Prevention Options

Are you having trouble paying your mortgage? You have several options that could help you prevent

The best option(s) for you will vary based on your situation.

Your first step is to seek free debt counseling. You should find an approved, non-profit housing counseling
agency. The advisor will take a comprehensive look at your budget. They will also help you identify your
options. This will help you make an informed decision.

You may be too nervous to contact your mortgage company. Counselors can help you contact your lender
for you. They also know how to speed up the process. They can even help you gather the required documents.

Options for Keeping Your Home

If you want to stay in your house, you may consider the following options:

Repayment Plan

This is one of the simplest options. Your lender may agree to allow you to make regular monthly
mortgage payment, plus an additional amount. Repayment plans can extend from two to 18 months.
This helps your catch up on your mortgage without extra hardship. You usually have to make a good
faith payment up front. The amount of this payment varies, but is usually the same as your monthly mortgage payment. A repayment plan may be a good option if your can afford to pay extra each month to catch up on missed payments. A repayment plan may be a good choice if you were unemployed for a period of time but now have a job.

Modify Your Loan

This is a written agreement that changes the original terms of the loan. You may be able to change the interest rate, the payment amount, and other factors. This option works when changes in the loan terms can reduce the monthly payment amount. The bank must agree. Modifications must be in writing.


This pauses your monthly payments for a period of time. At the end of the period, you must pay your debt. This can be a lump sum payment or a repayment plan. Forbearance may be a good option if you will be able to resume making payments by a specific date, and will have income to support repayment.


This is another option to lower your mortgage payment by taking out a new loan. Loans may have lower interest rates. Typically, refinancing has additional costs, such as application fees. Make sure to shop around for the best rate.

Options if You do Not Want to Keep Your House

If it is in your best interest to find other housing arrangements, consider these options:

Home Sale

If you have enough equity in the house to cover selling costs, selling the property may be a good option. If you want to sell your home, work with a realtor and expect the process to take some time.

Short Sale

This is when you sell your home for a price that is less the loan balance. The lender must agree to accept the profits of the sale as final payment of your debt. You are not allowed to sell the property to a family member. You may be asked to make payments while the house is for sale. As a condition of the short sale, lenders agree not to seek a deficiency judgment. However, you are usually required to pay taxes on the difference between the total debt and net proceeds of the short sale, which is reported to the IRS as income.


This option is when you give the house to the lender in exchange for an end to your debt. Lenders may consider a Deed-in-Lieu when all other options have been tried. Most lenders need that the house be listed for sale for at least 90 days. The difference between the market value and the total debt must be reported to the IRS as income. A short sale or deed-in-lieu will have a negative impact to your credit report. This is reported as “Paid – Settled for Less than the Original Balance.”

These options are not as damaging to your credit as a foreclosure, which appears on your record for up to seven years. It may take a number of years after a foreclosure before lenders will consider you for another mortgage.

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