Alternatives to Foreclosure When You Can’t Pay Your House Payments

Foreclosures are on the rise, and more and more homes are being abandoned when homeowners can’t pay their house payments. Unfortunately, many homeowners who can’t pay their house payments simply walk away because they don’t realize that banks and mortgage companies are willing to work with them in an effort to avoid foreclosure. They aren’t aware of the alternatives, but there are alternatives available for those who qualify.

Foreclosing on a home is costly and time-consuming, and depending on the state in which you reside, it can take several months. Besides valuable time, foreclosure costs a considerable amount of money, and lenders would much rather keep the lines of communication open and work with those who can’t pay their house payments. If you can’t pay your house payments, there are alternatives to abandoning your home. Once you abandon your home, these solutions may no longer be available, and alternatives should be looked into immediately.


If you have suffered a temporary setback that has prevented you from making your house payments, forbearance could be one of the best alternatives to getting your house payments back on track. If you qualify because of a health condition or a temporary financial problem, some lenders may be willing to postpone your mortgage payments or reduce them for a specific period of time. A repayment plan may be worked out, or the missed payments along with accrued interest may be tacked onto the end of the loan. If you are sure you can afford to keep your home once you get over your financial setback, contact your bank or mortgage company as soon as possible to find out if you qualify for forbearance.

Short Sale Alternatives

Those who can’t afford to pay their house payments and know they can’t afford to keep their home can request a short sale. Depending on your situation, this could be one of the best alternatives to foreclosure. Mortgage companies and banks that offer a short sale as a solution to those who can’t make their house payments are sometimes willing to take less than the amount owed on the home after the home has been advertised through a realtor at market value. Depending on circumstances, lenders are often willing to completely forgive the homeowner of the debt.

In many cases, the homeowner and lender have certain provisions that must be adhered to when attempting a short sale. Many lenders require the home to be on the market for a minimum of 90 days, they require a realtor fee of no more than 5%, and the realty must be a member of the MLS. A hardship letter explaining the reasons for financial problems as well as a list of debts and income are required. If you can’t pay your house payments and can prove financial hardship, a short sale could be one of the most viable alternatives to your financial problems.

Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is sometimes available for those who can’t pay their house payments because of financial hardship, and this may be one of the best alternative for you if you can’t afford or pay your house payments. This option is much less devastating to credit than a full-blown foreclosure. It saves lenders the time and expense caused by homeowners who abandon their homes, and it’s one of the best long-term solutions for all concerned.

Before most lenders will offer a deed in lieu of foreclosure, many require the house to be on the market at fair market value. This shows the homeowner is trying to find a solution, and it lends credibility and shows good intent when the homeowner is actively trying to sell the home. If the market is stagnant and your home doesn’t sell, if you qualify for a deed in lieu of foreclosure, the lender will allow you to sign off on the house and walk away without owing on the mortgage.

When applying for a deed a lieu of foreclosure, more than likely you will be interviewed by a customer service representative. The representative will ask why you can’t pay your house payments, and he or she will determine whether or not you are a good candidate for a deed in lieu of foreclosure. Your information will be recorded, and your case will be assigned to a negotiator in the workout department. The negotiator will check into your financial situation and make a determination after considering all of the facts and figures.

Don’t Wait to Contact Your Lender

If you are unable to pay your house payments, don’t wait for a windfall that may never come, and don’t give up and avoid your lender. Consider all of the alternatives suggested by your lender. You don’t have to abandon your home, file bankruptcy, or completely ruin your credit if you can’t pay your house payments. Contact your lender to explain your situation as soon as possible. Most lenders are very understanding of those who are having legitimate financial problems, and they want to help you find a solution. Abandoning your home or filing bankruptcy isn’t in the best interest of the lender or yourself, and the solutions and alternatives that are best for your lender are more than likely also best for you.

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