Don’t let foreclosure spring up on you: Control your financial situation

Take action to prevent losing your home to foreclosure at the first sign of financial trouble.

The worst thing a homeowner can do when financial difficulties spring up is to pretend everything is fine and not tell anyone. Life happens and though it can be difficult to ask for help, ignoring the situation will be harmful in the long run. Specifically, when circumstances prevent a homeowner from paying their mortgage payments on time, the best time to ask for help is before becoming past due.

At the first sign that making the mortgage payment will be a struggle, there are multiple questions to consider to make sure the situation doesn’t get out of control.

  1. Assess your financial health
    • What expenses can be cut, even temporarily?
    • Are there other sources of income that can be used?
  2. Is the situation temporary or longer term?
    • Recovering from expenses like an unexpected car repair can often be remedied quickly. If the issue is a medical problem or unemployment, it may take longer to bounce back financially.
  3. Who can help?
    • The lender by setting up a repayment plan, or other options to work with you.
    • Making Home Affordable is the government website set up to assist homeowners struggling with mortgage payments. There is information on how to work with the mortgage company and links on finding assistance.
    • A certified MSHDA or HUD housing counselor specializes in assisting homeowners in dealing with lenders and explaining the options available to them. They will not charge for their services and are experienced in helping to avoid foreclosure.
  4. What is the plan for catching up on the past due amount? Be reasonable and realistic in establishing a plan for repayment or asking for assistance from your lender.

Be proactive and honestly assess the current financial situation. Next, reach out to ask for help from certified housing counselors who specialize is assisting homeowners in this type of situation. Decide how important it is to retain the home. By taking prompt action, there are more options available. Failing to act lessens the options and can leave homeowners feeling helpless.

Much has been written about mortgage lenders being unhelpful or uncaring when a homeowner experiences financial difficulties. However, once the homeowner’s financial assessment is completed, it’s time to have an honest conversation with the lender. By letting the lender know early that there is a financial blip in the radar, they can better assist with options to resolve the issue. When the homeowner waits too long, lenders usually will no longer work toward a mutual resolution. 

In summary, being proactive and taking control of your finances allows more options to prevent the financial situation from getting out of control and possibly leading to foreclosure. 

Michigan State University Extension has released a new toolkit for homeowners who are experiencing or have previously experienced foreclosure. This toolkit will equip these individuals and families with tools to help them recover their financial stability, in the case that a recovery of their home is not possible. The toolkit is available to download free at the MI Money Health website

Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information about classes in your area, go to either the event webpage or the MI Money Health page. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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