Liz Pulliam Weston wrote recently on steps to take if you’re facing foreclosure. There are smart ways to go about it, and not-so-smart ways. Here are three more of her suggestions with some of my comments:
Be realistic. A house is just a house. It may have a lot of sentimental value but when all is said and done it’s just a structure and a place to hang your hat and store your stuff. If this structure is costing too much, then getting out while it’s still possible to get out is wise. I certainly wouldn’t want to pull myself away from my house, but when facing foreclosure being able to walk away with the credit rating intact is certainly a better option. This might mean forfeiting some equity to sell the house, but in today’s market, selling and living to tell the tale is a win.
Get organized. Especially if you’re approaching your lender for a modification to your loan. Weston writes: “The lender will specify what it wants, but typically you’ll need to supply the details of your financial situation, a budget, documentation of your hardship (a letter from your doctor explaining an income-reducing illness, for example, or your layoff notice from your employer) and a ‘hardship letter’ that outlines, in heart-rending detail, the circumstances that led you to fall behind and the improved prospects that will allow you to get your financial life back on track.” Even if this isn’t the case, organization helps, because maintaining the paperwork from the lender is useful for whatever negotiations you want to attempt.
Sell the house. If you have enough equity in your home to pay off your mortgage and pay the real estate agent’s commission, this is the best outcome if you’ve reached the conclusion that you can’t afford the house anyway. The bad marks on your record stop and the problem (your house) is gone. If you’re actually in a position of positive equity, your lender will be less likely to make a deal with you anyway since their loss is probably covered.