If you experience a long period of financial difficulty, you may worry that will no longer be able to afford your Michigan home. If you stop making payments, the bank will repossess, or foreclose on, your home … Or will it? Before you throw up your hands in defeat, know that there are a few things you can do to try to keep your home. FindLaw explores the various alternatives to foreclosure for you to consider.
The first alternative to foreclosure to consider is mortgage modification. If you can prove that you can make some sort of monthly payment, your lender would likely prefer to work with you than foreclose on your home. Mortgage modification involves refinancing your debt and/or extending the life of your loan. Doing either would reduce your monthly payments to a more affordable level, thereby making it easier for you to get current on your payments.
The second alternative is a special forbearance. If you qualify, your bank may either arrange a repayment plan based on your financial circumstances or temporarily suspend or reduce your payments. This may be an option if you earn less now than you did at the time of obtaining the mortgage or if you experienced an increase in day-to-day expenses.
Your third option is a pre-foreclosure sale. Homeowners who go this route recognize that there is no way they will be able to ever again afford mortgage payments on the home and so sell the home for less than what it is worth. They then use the proceeds to reduce the amount of outstanding debt.
A fourth option is a partial claim. In special circumstances, a lender will work to acquire a one-time payment from the FHA-Insurance fund, which it will then use to bring the mortgage up-to-date. You may qualify if, once you are current, you are able to continue making the normal monthly payments.
The fifth and final option is deed-in-lieu of foreclosure. This is typically a last resort option as it involves voluntarily giving your home back to the lender. Though this option does not save your house, it does preserve your credit score.
You should not use the content of this article as legal advice. It is for learning purposes only.