If you are a distressed home owner, there are solutions in place that can help you out. You should find yourself a specialist like Stephen Buzzi, who will be able to discuss those solutions with you, agree on which one is best, and even negotiate with your mortgage lender for you. Two options that you may want to consider are the forbearance agreement and the loan modification. One of the key reasons why you should speak to a specialist like Buzzi, however, is because those two are not the same thing, even if they look alike. If you choose the wrong one, you may find that you didn’t solve your problem at all.

What Is a Loan Modification?

In this scenario, your existing mortgage will be permanently restructured so that your monthly payments go down. You can do this by finding a new lender to take over the mortgage, or you can negotiate new terms with your existing lender. Doing this can make a drastic impact on your monthly cost and help you to avoid foreclosure. However, you have to be eligible first, which means showing financial need through hardship letters. Additionally, you must be willing to increase the term of your mortgage.

What Is a Forbearance Agreement?

Just as a loan modification, a forbearance agreement helps to lower your monthly payments, or even cancel them out completely. However, it only does this for a short period of time, after which your monthly payments will rise substantially so that you make up for whatever payments you have missed. This means that this solution is only suitable if you know for sure that you will be able to pay more after a few months.

Forbearance agreements are most suitable for those people who have a temporary financial difficulty, rather than a long term one. For instance, you may have been laid off but have high demand skills, you may have some credit card debt, or you may be incarcerated for a short period of time. Alternatively, you may be in the process of filing for bankruptcy, in which case you could ask for a forbearance up to the point that you will be declared bankrupt, which will free you up financially.

Both agreements are viable solutions to help you avoid foreclosure and most distressed borrowers will be able to access at least one of the two options. You must, however, speak to a specialist who can look at your individual situation to determine which of the two options is most suitable to you. They may come to the conclusion that you should simply sell your property, for instance through a short sale, instead as well. Whichever decision you take, however, you must take it quickly if you want to avoid the Notice of Default appearing on your doorstep, which signals the start of the foreclosure process.

Remember to always do your research, so that you find a solution that is suitable to your particular needs and your individual situation.

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