There are many reasons why you could fall behind on your monthly mortgage payments. The reason may not always be that you borrowed more than you could actually afford. Many situations happen when a predicted budget spins out of control for circumstances such as a lost job, a major illness, divorce, etc. These situations are unexpected and could happen to anyone.
Regardless of the reason for your failure to make your mortgage payment, our nation’s consumer protection agency, the Federal Trade Commission (FTC), wants you to know how to save your home, and avoid foreclosure scams.
Staying in communication with your lender can help you. Your lender doesn’t want to foreclose; therefore, they will try to work out a plan with you to get the payments back on track. Remember, it is best to never ignore your lender calls.
Here are some options that you should discuss with your lender or housing counseling organization. (United Financial Counselors: Hint, Hint!)
Ask your lender about
- Forbearance plans– A plan that can temporarily suspend or reduce the mortgage payments
When to apply
The situation must be temporary
You cannot/or are ineligible to refinance
Pro : Less damaging to your credit score than a foreclosure, helps you avoid foreclosure
- Repayment plans-A plan where you divide and stretch out your past due payments. These past due payments will be added on to your current mortgage payment over a span of several months to bring the account current.
When to apply
This program is for short term hardships.
You are a few/several months behind on your payment
You cannot/ or are ineligible to refinance
You must be able to comfortably make your current mortgage payments
Pro: You can bring your mortgage current ,stay in your home, avoid foreclosure, catch up on missed payments, and your credit does not take as bad of a hit as a foreclosure.
- Loan modifications –This is an agreement between you and your mortgage company to rewrite the original terms of your mortgage. There may be changes such as the amount of the principle that is due, a lowering of your interest rate, an extension of the length of the loan, and most importantly, a reduced monthly mortgage payment.
When to apply
This is for a long term hardship
Pro: You resolve your delinquency with your mortgage company, have a more affordable payment, the loan terms are renewed, avoid a foreclosure, and you can stay in your home
Keep these options in mind as they are designed to keep you in the house without foreclosure.
If these programs do not suit your situation, you should also consider these alternatives to foreclosure.
Some alternatives are
Short sale: – allows the sale for less than the mortgage balance. A short sale is less damaging than a full foreclosure.
You could also transfer your ownership by choosing a deed in lieu of foreclosure transaction, and vacate the home.
Keep notes of any conversations you have with the mortgage company. This can be shown to the next lender as a proof that you had tried your best to keep your home.
To learn more, visit: Ultimate Debtor Guide: Loan Modification Vs Short Sale Vs Deed In Lieu of Foreclosure
Final Note: You home is precious and you should be the one to decide program what will work best for you. When you realize you cannot make your next mortgage payment, do not procrastinate. Many people lose their home because they wait until it too late. There are many companies out there such as United Financial that can assist borrowers with these programs. Help us, help you, get back on your feet!
Want to learn more? Read: How Can A Financial Counselor Help You Deal With Debt?