A foreclosure is a serious problem with long-term consequences. In fact, according to financial experts, people who experience a foreclosure are likely to face long lasting damage to their credit, including a lowering of their credit score by as much as 160 points. If the foreclosure accompanies a bankruptcy, the damage becomes even more serious and enduring. If you are facing a foreclosure on your home and struggling to find a way to stop the process and lessen the damage, the following strategies can help.
Examine your current budget and be prepared to make hard decisions
If you are facing foreclosure due to budgetary issues or a decrease in income that has made you unable to meet all your financial obligations, taking a hard look at your current budget and payment priorities can help. To do this, look at each obligation you have and divide them in one of the following three categories:
- critical - this category is for food, housing, utilities, health needs, and basic transportation needed for work
- less critical - secured debts other than the home and the primary car needed for work, including second or third vehicles, boats, etc.
- least critical - this category is for any unsecured debt payments, such as credit cards, and any non-critical spending, such as entertainment, gym memberships, vacations, etc.
Once you have compiled a list of your critical expenses, use whatever amount of income you have to satisfy these needs, including the house payments, before worrying about paying credit card bills or doing any non-critical spending. Once you have caught up on your home's payments, you can work with credit card companies and other non-essential creditors to get back on track, but until that time, your home must be your priority.
Look for fast ways to increase income
When more income is needed to catch up outstanding mortgage payments and get the family finances back on track, it can be very helpful to look for fast ways to bring more cash into the household. Good ways to make immediate money can include pursuing a part-time job delivering pizza in the evening, waiting tables, or providing child care. Unlike starting a business or taking additional training or classes, this type of work can usually be found in most locations and will provide immediate cash.
Consider selling the home before the foreclosure takes place
Homeowners who feel they cannot catch up on their house payments fast enough to forestall a pending foreclosure can salvage their credit rating by selling it for cash before the foreclosure process is complete. To do this, look for a reputable real estate investor in your area who is offering to buy homes for cash. In most cases, these transactions can close within a few days, with no worries about inspection or appraisal issues and allow the seller to limit the damage to their credit rating.Share