Sometimes, it is difficult to know when you have been beat, or when it is time to give up on something. With foreclosure, it can be quite different: it is actually very easy to know when it is time to throw in the towel. Foreclosure is a very costly procedure, both mentally and financially, so knowing when to stop fighting and when to move on with your life is very important. The only real issue for homeowners is to realize when it is time to quit fighting and how to successfully navigate the foreclosure process, with the least amount of damage to your credit.



Step #1 – Knowing when to quit

As mentioned above, with foreclosure, it may be very simple to decide when you should give up your home. Once you have examined these few issues, you should know if saving your home from foreclosure is still possible.

Can you afford your home if your interest rate was set back to its original amount? If you can and your home has not already been sold, then keeping your home is still possible.

Do you have enough money to pay 25 extra to pay the arrears.

Even if you can afford your payment, is your total payoff more than the home is worth? If you are paying more than the home is worth, then why would you want to keep it? Unless you have a very strong sentimental attachment, or you expect the value to drastically increase in the near future, it is probably time to move on.

In general, you can calculate your total payoff at a 9% interest rate, over 30 years, if you are considering a mortgage modification or other payment plan. If this new payment is affordable for you and you are not paying more for the home than it is currently worth, then saving your home is probably an available option for you, as long as your income is stable enough to get through the plan.

Step #2 – Giving back your home without foreclosure

First, homeowners should be clear on one important issue: far too often, people who do not want to keep their home mistakenly believe they can just give the deed back to the lender and walk away free and clear. They think they can keep their perfect credit score and give back the home without facing foreclosure. This virtually never happens. Your lender does not want your home and they certainly do not want you to have the ability to give it back and walk away with no negative consequences.

The nearest option available that resembles this is a deed in lieu of foreclosure. This is when the lender accepts the deed for your home and forgoes the foreclosure process. If done correctly and quickly, this method could be your best alternative to foreclosure, but if not completed correctly, a deed in lieu can be more time consuming than going through the legal process and losing the home at sheriff sale.

Another alternative to foreclosure is to sell the home using a short sale. A short sale is when your lender accepts an offer on the home for less than what is owed. For example, if you owe $200,000 on your home, but the best offer you have is $130,000, then your lender may accept $130,000 as a full payoff. When you lender accepts such a settlement, this will (in most cases) stop foreclosure at any point of the process and if a deficiency judgment is not allowed, it can prevent any further damage to your credit.

Professional help is highly recommended for either executing a deed in lieu or attempting to sell for less than the total amount owed on a mortgage, to avoid the many legal “loopholes" and financial pitfalls that accompany either of these options.

If going through foreclosure is inevitable, then your best bet is to get through it as quickly as possible. Do not drag things out or waste time, explain your situation to your lender and make sure they know you want things to move as quickly as possible. Many homeowners and/or lenders drag the foreclosure process out for a year or longer. If this does last for more than twelve months, you can expect your credit to take another twelve months or even longer to begin the process of repairing itself. However, if the foreclosure only lasts for three months, your credit should be much less damaged and will not take as long to repair. Of course, this is assuming you only missed your mortgage payments during your hardship and your credit was good up to that point.

Step #3 – Stop dwelling on the past and look towards the future

Foreclosure is something that is happening to many people right now, so you are certainly not alone. There is no reason to keep yourself down or think that you did something wrong, you just need to make a fresh start and move on with your life. Your first step should be to get your income and expenses back on track. Find a new place that is more affordable and try to save as much money as possible.

After your income is stabilized, you need to begin the process of credit repair. The fastest and easiest way to repair your credit is to pay off everything negative on your credit report. You will need to order copies of all three reports and begin to settle any outstanding debts. There are credit repair companies that can help you settle these debts for much less than the amount owed, so it may be a good idea to work with a credit repair professional. But be careful, because there are very few qualified debt settlement and credit repair professionals out there. A handful of companies you find online, or advertising on TV are frauds and outright scams.