What to Do if You Are Struggling with Mortgage Payments
The loss of a job, the decrease in your ability to pay, hardships of other types and simply just making financial mistakes can all cause you to find yourself struggling to make mortgage payments. If you are unable to make your payment, or you are having a hard time keeping up, take action. The worst possible thing you can do is to do nothing and to find yourself months behind on your mortgage with no way to get caught up and then to end up facing foreclosure.
Take Action Now
It takes just being behind on your mortgage for two months for the lender to begin the foreclosure process. It can take three to six months for the lender to foreclose on you, too. The result of foreclosure is your inability to remain in your home. If you default on the loan:
- The lender will take legal action against you to force the sale of the home or to take ownership of it.
- The lender may pursue you for any unpaid balance after the sale occurs.
- Your credit takes a hit if the foreclosure process goes forward.
- Any money you paid into the home is gone.
- In some states, there is no way to get the home back.
You can avoid this in many situations. The key is to take action as soon as possible to avoid it.
You Have Time
If you are just finding yourself struggling, but you are not behind yet, it pays to take action now. There are several things to consider doing at this point.
- Talk to lenders to find out if you qualify to refinance the loan. Refinancing is an effective solution for those who are able to wait up to 30 days for the process. You will need to qualify for the new loan, with a good credit score, employment verification and enough income. More so, to avoid closing costs, you will need to have equity in your home. This means that the home’s value needs to be at least as much as the refinance amount plus closing costs.
- Sell your home. This is especially important if you have equity in your home that you do not want to lose due to foreclosure. In addition, if you want to protect your credit, selling the home is the best route to take. The problem is it needs to happen fast enough. You may be able to find buyers quickly but you will need to maintain your payments until you sell.
- Push for a short sale. In a short sale, you do sell your home, but you are able to give the buyer a deal, which may attract buyers faster. In this process, the lender agrees to allow you to sell the home for less than what you owe, to the new buyer. They will do this if they believe that you are likely to foreclose if you remain in the home.
- Rework your other debt. You can often get debt counseling help to help you to reorganize some of the debt you have. For example, instead of trying to decide to pay the mortgage or the credit cards, work with a consumer credit counselor to develop a budget and to curb your other debt payments, freeing up more money to pay your current loans like your mortgage.
In these situations, you will need to have time. If you do not have time because you are already behind, you may need to take other actions.
In some situations, your lender will work with you if you pick up the phone and call. If you are able to pay your mortgage, but need help catching up, for example, the lender may help you to do this by allowing you to tack on missed payments at the end of the loan. Your lender is the first step to make when you missed a payment.
The next step is to apply for government assistance programs. The Making Home Affordable program, for example, can help you to get current because it offers incentives to lenders who work with borrowers to rework mortgages. This program does have qualifications, such as having income and being behind on your loan. In addition, there is no guarantee that you will be able to stay in your home. Also, note that there are no problems that will just pay your mortgage for you until you are caught up.
In some situations, you can take the drastic move of filing bankruptcy. You could do a few things by making this change.
- File Chapter 7 bankruptcy and get out of the mortgage and all of your other debt. It will hit the hardest with 10 years on your record, but it gives you a fresh start financially.
- Get your mortgage up to date, file Chapter 7 bankruptcy, and reaffirm your mortgage. If you are struggling with other types of debt such as credit cards, medical bills and even second mortgages then this method will get rid of that debt and put you in a better position to pay your mortgage.
- File Chapter 13 and take advantage of asset protection. The bankruptcy trustee may help you to work out a plan with your mortgage lender to remain in the home, assuming this is possible to do. This method protects your assets, as long as you can continue to make payments.
Talk to an attorney about these options before you decide to use them. The key is to take action in any situation. If you are behind on your mortgage, it is up to you to find the right way to get caught up on those mortgage payments. The longer you wait, the less time there is for you to get caught up or to get out of the loan altogether. The good news is that you can own a home again down the road if you do lose your home – it will take time, though.