OK, if you've found your way to this article, two things are probably true:
One, you are in trouble and you're either struggling to make your mortgage payments or you are worried that you will be struggling soon.
Two, you KNOW you're in trouble and you are looking for help to figure out the best actions to take to save your home.
The good news is that you KNOW you're in trouble. That's an important first step. We are here to help you figure out what to do next, and in some cases what NOT to do.
Below are some questions you need to ask yourself. How you answer these questions will help determine what to do next.
1. Are you are still making mortgage payments (even if you won't be able to very soon)?
2. If you are behind on your mortgage payments, how far behind are you? Have you responded to notices sent by your lender?
3. Do you know the terms of your loan? Specifically, if your have an adjustable rate mortgage (ARM) do you know when the interest rate will increase and the amount you will be expected to pay in future months?
4. Do you have the money to make the payments at the current amount (even though you may be in serious trouble when the payments increase)?
5. Do you know who (which financial institution) currently holds your home loan? Remember, the company that gave you the loan is probably not who owns it now.
The following steps are designed to help you save your home. But, they are not easy. They require hard work, dedication and determination on your part. You need to act quickly because the longer you wait, the fewer options you will have. So let's get started.
Step 1: Decide to Fight for Your Home
Ask yourself if you are ready to take responsibility and WORK your way through your current financial challenges. You have to be honest. You have to know how tough you really are. There will be pain. Now, if you are ready to do whatever it takes, keep reading, if not, don't waste your time, just go watch TV or do whatever else you'd like to do while you're waiting for your financial world to crumble on top of you.
Step 2: Build a Rock-Solid Budget on Tough, Honest Choices
Write down your budget for the next several (3-5) years. This may sound hard, but do it. The word "budget" sounds like a complex plan that takes a long time to construct, but it doesn't have to be that complicated. It's just a list, month by month, of the money that's coming in and the money that's going out. What makes a budget good? Just the thought and honesty you put into it. What are you really going to make? What are you really going to spend? You will have to make some guesses. You don't know what gas will cost next year (assume it will be more than it is now, at least 10% more each year). You don't know how much money you'll be making (assume it will stay exactly the same as it is right now).
You will have to think (hard). What happens in January? Will you have to pay for presents? What happens in July? Will you have to pay for travel? You get the idea. Assume something will hit you out of the blue every 3 months or so (car repairs, an appliance dies, etc.).
Once you see all of the "money out" items in your budget, you may need to make some hard choices. What can you live without to save your home?
Step 3: Know Your Budget Like the Back of Your Hand
Now that you have your budget, memorize it. I mean it. Memorize every little detail. Put it on flash cards if you have to. You should be able to recite every money-in, money-out detail if someone dumped a cold bucket of water on you at 3 o'clock in the morning. Why? So when you're about to buy something you can ask your brain if it's in the budget. Your brain will know the answer immediately. There will be no "maybe it is" or "maybe it isn't".
Step 4: Learn to Think Like Your Bank
You are going to contact the bank or the mortgage lender that currently holds your home loan. But don't pick up the phone yet! First you have to be ready to have the RIGHT conversation with your bank. You know your budget by heart (that was Step 3), now you have to learn the RIGHT way to present yourself, and your budget to your bank. The right way means that you appear to be someone who is AHEAD of the game. You appear to be someone with a clear plan (your budget). You appear to be someone who is going to be able to survive your current money problems.
Put yourself in the shoes of your bank. You (the bank) has hundreds of people in trouble with their home loans. You can't help every one of them. You are a bank, and you don't need a bunch of homes (especially not NOW, when every other bank is experiencing the same problem). What does your bank want? They want "bad" loans to go away. They can either play hardball with you and take your home (and sell it for a loss just to make the whole painful episode end) or they can work with you, so you can keep paying. What does that mean for you? It means you have to look like someone who is going to be able to keep paying. They want to be sure you aren't lying about what you make or what you spend each month. If there's NO chance you'll be able to keep up with lower mortgage payments, there's NO REASON for them to help you! You'll just be back in trouble in a few months anyway, and they'll end up taking your house (foreclosure). If your bank thinks you are a hopeless cause, they'll just foreclose now rather than prolonging the pain.
Step 5: Track down whoever is Holding Your Home Loan
Contact whoever is currently holding your loan/mortgage. If they've sent you mortgage materials telling you how to contact them, great. If not, locate your lender any way you can (phone number on mail they've sent you, yellow pages, internet search, etc.). Call or write to them and tell them about your situation. Be clear about what you want (I want to keep my home. I have a clear budget that will allow me to make payments of a specific amount, etc.). If your goal is to keep your home, then make sure they know that you have a plan (the budget that you've carefully built and memorized). Leave no doubt that you are better than you look on paper (your credit score, your payment history, etc.).
Tracking down the actual owner of your loan can be difficult. You can start by calling or writing a letter to the company that receives your monthly mortgage payments. Expect to hear something like, "We don't actually own your loan, we just process the paperwork" from this company. In your communication with them make the following request: "If you don't own this loan, please send me the contact information for the company that does own it." You may have to go through several companies to find the one that owns your loan and has the power to change its terms (to freeze or reduce your payments). Do not give up. If it's hard for you, it's also hard for all of the other people out there who are also struggling with their home payments. You are competing with these people to be selected as one worthy of help from your lender. You should be happy that the task of finding that lender is difficult. You should be happy because other people will give up once they see that locating the lender is difficult. But you won't give up until you find them. Be tough. Do not give up.
If you reach a dead-end in your effort to locate the bank that holds your home loan, then contact the consumer affairs department of your state's Attorney General Office and ask if they have a mortgage unit. Tell them what you are trying to do, and ask how they can help.
Step 6: Respond to Whatever Your Lender Throws at You
How your lender responds to your request will determine how you proceed. If they are willing to work with you, great. If they ask for more information from you, follow their instructions, and give them what they ask for as quickly as you can. If they deny your request, ask them what you could change that would make them agree to reset the terms of your home loan.
It's OK to look for help. Some of the links on this page may help you. Some of the advertisements and offers may provide information or services you can use. Shop around, learn, and explore your options. But don't let anyone push you into anything you don't fully understand.
There are lots of companies out there that talk about foreclosure prevention or debt rescue. They may tell you that they can let you keep your home and help you pay your mortgage. They may have a plan where you can stay and just pay rent. Be very skeptical. Ask every question that pops into your head. What will really happen to your mortgage? What will happen to your credit? Make them prove that their plan is best for you. Did they ask you about your specific situation? If they don't ask you about your specific situation (your budget, for example) how can they possibly know what is best for you? Ask to talk with satisfied customers. Some companies can provide real options that may help you. But many, many companies talking about foreclosure prevention, mortgage restructuring, loan modification and/or mortgage rescue are simply predators. They know you need help. They know you need to act quickly. They might just want the last few dollars you have.
You should check out accredited debt counselors in your area. You can get a referral to a non-profit counseling agency approved by the Department of Housing and Urban Development at www.hud.gov. The National Federation of Credit Counselors also has a program to certify counselors.
These steps are not easy. But remember, if they aren't easy for you, they aren't easy for other people struggling to make their mortgage payments. Be tougher than these other people. Keep going when they give up.
Remember, no one can guarantee success. But giving up will guarantee failure.
