Alternatives to Foreclosure

A common reason I have heard from others who have had their home go into foreclosure or who have filed bankruptcy is "We didn't know what else to do." They either did not find good information to lead them down a different road, or they were too embarrassed to let someone else look at the dirt in their finances. (Shame can do a lot of damage that follows one around for years. This typically leads to, you guessed it, more shame.)

Here are some alternatives to foreclosure. This is not a complete list but includes some of the things I find more favorable or am most familiar with. There are pros and cons to each, but I'll leave the list simple and those who are interested can research the options that sound most appealing.

1. Rent your home. Maybe you can't make the mortgage payments, but it is possible someone else may be able to for you.
2. Offer rent-to-own. This is renting out your house except someone who wants to enter a rent-to-own situation is usually willing to pay more per month than someone who is simply renting.
3. Rent part of your home, maybe a room.  Do you have an extended family member who is starting out? Could you rent out to a college student? Newlyweds? A retiree? Someone who is newly divorced?
4. Refinance.  You may be able to lower your monthly payments by qualifying for a lower mortgage rate.
5. Sell your home. Sell the house and give up some or all profit by listing the house for lower than competing houses on the market.
6. Sell your home for less. Lower the price even more and bring the shortfall to the table via a smaller loan.
7. Assumption. Sign the property over to another person who then takes possession of the house and takes over the payments.
8. Deed in Lieu of Foreclosure. Voluntarily give the house back to the lender without further damaging your credit.
9. Short Sale. This is like selling your home for much less than the mortgage balance but without the ability to bring the shortfall to the table. The bank must approve the offer submitted by the eager buyer. The bank can still later come after you for the difference UNLESS you have agreed in writing to a "short sale without recourse".

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