Can you guess? What is one of the most common mistakes made by homeowners who are behind in their payments and are in danger of losing their home?
Uncomfortable with bad news, or believing financial salvation is around the corner, they ignore the notices from the bank. Time passes, court dates are missed, and soon the sheriff is at the door to evict them and put their belongings in a Dumpster.
If you just lost your job or are saddled with debt from medical bills or credit cards, the best course you can follow is to contact the lender immediately and explain why you are late with payments. That is the advice of real estate agent Jon Sterling in his new book Mangled Mortgage. His book lists the top mistakes made by borrowers in default.
Lenders, already saddled with huge inventory of foreclosed houses, would prefer not to take your house, Sterling explains. The bank may offer you programs that can help you stay in your home.
Early on, some homeowners in distress may pay large fees for a loan modification. Sterling suggests that you first search for free options. First, turn to free services offered by your lender. Whether your bank has a team or just a single person to handle such requests, it will serve you well to stay in touch and be persistent. You can also seek help from your municipality, which may have a program to help families stay in their homes. Finally, check out non-profit groups. The consumer attorneys at NACA.net or coalitions like HopeNow.com may be able to delay or stop foreclosure.
Do your due diligence and research and protect yourself from mortgage scams, Sterling advises. Websites such as Yelp and StepRep can help separate the legitimate services from the crooks.
Borrowers more often are getting the lender’s approval to try a short sale. That means selling the home for less than is owed. They may feel comfortable working with an agent who is a relative or friend. That is a mistake, Sterling says. It is important to hire an impartial agent with experience in short sales and foreclosures. Be sure to check out the agent’s references. The complicated process may take up to a year and requires patience on your part and your agent’s.
Another common mistake, Sterling says, is letting your investments and savings run out before you ask for help. That leaves you little choice other than foreclosure and ruining your credit record. The sooner you contact the lender, the more strategies may be available to you.
Foreclosure should be the last resort, Sterling says.
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