How to Renegotiate Your Mortgage to Avoid Foreclosure

The prospect of foreclosure is among the most stressful financial situations for any homeowner. Going into foreclosure means losing your home and having to find alternative housing, but it can also ruin your credit, reputation and self-image. If the home sale brings less money than you owe on the home, the lender can also sue you for the difference, leaving you owing money on a home you no longer own. Fortunately, simple strategies can help you renegotiate your mortgage and avoid the devastation of foreclosure.

Instructions

1

Contact your lender as soon as you realize you cannot afford to make your mortgage payment on time. Your lender will be more likely to work with you if you proactively communicate your concern.

2

Obtain your credit report from Equifax, Experian and TransUnion, the three major reporting bureaus in the United States (see Resources). Also, obtain your FICO score, which reflects your creditworthiness. These items will help you determine which type of mortgage renegotiation you will qualify for.

3

Determine the probable length of your financial problems. Certain types of renegotiation are suitable for short-term financial difficulties, such as large medical bills or other unforeseen expenses, while others are appropriate for longer-term problems such as a reduction in pay or loss of a job.

4

Discuss your options with your mortgage lender. Short-term solutions may include temporary forbearance of mortgage payments or a repayment plan to catch up past-due payments. Longer-term solutions may include a mortgage modification or refinance.

5

Provide your lender with financial information concerning your income and expenses. This may include pay stubs, tax returns, alimony or child support agreements and installment credit card and bank statements.

6

Complete any paperwork necessary to formalize your mortgage renegotiation. Your lender may require notarization of some documents.

7

Stick to the renegotiated mortgage plan by making your new payments on time to avoid future problems.