Tuesday, June 19, 2007
Mevish Jaffer

If you’re like most people, then you probably have the tendency to associate the purchase of a home with achieving the ultimate “American dream.” Unfortunately, there are times when that “dream” has the potential to turn into an utter nightmare. In the event you come across financial difficulty over the life of your home loan and therefore become unable to make your monthly mortgage payments is a prime example of how the tables could turn.

The Last Thing on Your Mind

The truth of the matter is that you never consider the prospect of foreclosure when buying a home; the thought process is more like, “Sure it happens to some people, but I don’t think it will happen to me.” In reality however, you can never be too sure of what your financial circumstances will be like down the road. Sadly, a lot of unexpected financial situations do result in foreclosure – the lending company takes your home from you as payment for the debt you owe but are no longer able to settle. There are some serious ramifications of having a foreclosure on your record. The main one is the fact that it does some heavy damage to your credit rating (which stays on for a lengthy period of time) and as a result, may greatly limit your options to buy another home in the future.

So the question is how can you prevent foreclosure from happening if you find yourself in a financially sticky situation? Well for starters, you can try discussing the matter with your mortgage lender or mortgage broker. While it’s fairly common to express some reluctance as a result of feeling embarrassed about airing out your dirty laundry so to speak, financial difficulty is nothing to be ashamed of and should be voiced to your lender. Keep in mind that lenders are not out to get their hands on your home, rather it’s more work on their part to re-sell properties once they have been foreclosed. The more you procrastinate speaking with your lender about your mortgage payments, the harder it will be to find an adequate solution.

Forbearance to Prevent Foreclosure

An option you might want to consider as a way to prevent foreclosure is mortgage forbearance. It’s commonly used for temporary financial bearing situations such as short periods of unemployment or poor health. In the simplest of terms, mortgage forbearance enables you to temporarily stop making your mortgage payments.

As for mortgage rates and interest, they continue to accumulate on the mortgage forbearance and is added to the remaining balance of the loan. You are generally also asked to sign a forbearance agreement that states when the lender will require you to pay the amount you owe. Once the forbearance period comes to an end, you are once again obliged to make full payments on your home loan.

While mortgage forbearance may only serve as temporary fix, it does buy you some time to overcome your financial state, and is a far better option than loosing the home you worked so hard to purchase.