Your Best Options When Facing Foreclosure

To many people affected by the housing crisis

, foreclosure seems the very worst case scenario. Some can see it coming, but are paralyzed with fear and confusion. Here are some ideas to jump-start your efforts to address your situation.

Try to Work it Out with Your Lender

This is a good option if you have detected or acknowledged the problem in its early stages. You might be tempted to think of the lender/bank as the enemy, but really, they would prefer you to stay in the house and keep paying your installments because they can make more money that way. They might work out some kind of deferment arrangement with you.

Find Out if You Can Get Refinancing

This is an advantageous option if interest rates are lowering. Of course, you should first find out if you qualify before you even start your application. Your credit score and your home equity in terms of percentage should be sufficiently high. Otherwise, you might have just wasted the cost of a rather expensive application fee for an option you would automatically be ruled out for anyway. The key is to start early so you have time to research.

Don't Fight It

This one might be the most shocking, wrenching option of all the ones available to you. After all, doesn't allowing foreclosure mean that you not only cannot make any money, but that you face big blow to your credit score as well? Is it not better to lose a great deal of money on a short sell?

Well, not necessarily. It can happen that going for a short sell may actually decrease the options you have available to you. For instance, you might be unable to declare bankruptcy, because the money from the sale will be considered income (even if it comes at a major loss to you because you sold the property well below its value). Income taxes will further cut into any money you may have "made" on the short sale. Of course, you can argue that at least you will have salvaged a decent credit rating. This is not necessarily true, either. In some cases (such as for certain but not all residents who happen to be 120 days behind your mortgage payments) your short sale will still be considered a foreclosure, and your credit score will be drastically lowered anyway.

If you happen to be one of these cases, the best thing to do might just be to let the foreclosure happen. If you do this consciously, and after considering all your options, do not think of yourself as having "given up." Rather, you are making the most of your time and money. Instead of spending it on arranging a rather useless short sale, use your time and resources to look for a new residence, or look up business options to get yourself back on your feet. A good investor knows when it is time to drop a faulty venture. Your house might be just such a faulty venture, in which case allowing foreclosure is the best business decision.

by: Beverly Manago

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