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Foreclosure Basics

The term foreclosure refers to the losing of possession over your home in case of defaulting payments. Under such conditions the lender has the right to foreclose your property and sell it so that they can use the proceeds for the coverage of the lent money. So, foreclosure represents the legal process that is undertaken.

On the other hand, foreclosure is not something inevitable. You have the option of consulting and working together with your lender and a housing counseling agency. Since borrowers who face foreclosure are most susceptible to scams, it is advisable that you use the services of housing counseling agencies that are approved by the US Department of Housing and Urban Development (HUD).

The possibility of receiving special forbearance exists. Under it, you can establish an alternative repayment schedule with the lender of the money. This new plan should reflect your new conditions. Some lenders give the chance of reducing or suspending payments in case you have become unemployed or have experienced some other event that has led to the loss of source of income.

Another alternative to foreclosure is the modification of the mortgage you currently have. This means that you will be able to either refinance or extend the term of your loan under the condition that you are being under the recovery from a financial problem.

In order to make your mortgage current, you will be able to ask for a loan from the HUD which has no interest. However, you should check whether you meet the special eligibility requirements.

The possibility of selling the home yourself also exists. This, however, can be done only if the appraised value of the home is not less than 70% of the money you have to return. Another requirement concerns the sale price of the property, which should not be less than 95% of the appraised value. There are some additional requirements you should check.

A final option you have is to "give" your property to the lender. Some people prefer this alternative to foreclosure, because they will avoid hurting their credit report and some other credit problems may occur as well. Check for the requirements you have to meet to qualify for this deed-in-lieu of foreclosure.

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