If you are behind on your mortgage payments.
If you are having trouble paying your mortgage and making your payments on time, immediately contact your loan servicer to discuss your options. If you call them early on, most lenders as well as banks are more than willing to work with customers that they believe are acting in good faith. However, the longer you wait to call, the fewer options you will have. If you delay starting this process the provider will be less willing to offer you help with paying your home loan or assistance with your monthly mortgage payments.
For example, after you have missed a few payments on your mortgage (or even if you are late), most home loan servicers will not accept a partial payment on what you owe. They very well may also start to increase the fees on your account and file a report with a credit reporting agency. Unless you have been in close contact with them, they will immediately start the foreclosure proceedings unless you come up with the money to cover all your missed payments, plus any late fees.
Avoiding default and foreclosure
If you have fallen behind on your payments or think you may in the near future, you have the following foreclosure prevention options to discuss with your loan servicer.
Reinstatement: You pay the lender the entire past-due amount, as well as any overdue mortgage type expenses or late fees, by an agreed upon date. The amount due can add up quickly. This option is very likely to be successful if your problem paying your mortgage is temporary and your need for help is short term.
Repayment plan: Your loan servicer gives you a predetermined amount of time to repay the mortgage amount you are behind. They will do this by adding a portion of the loan that is past due to your regular payment. If you have missed a small number of payments, this option may be appropriate as it should not be too difficult to get back on track.
Forbearance: Your mortgage payments are suspended or reduced for a period that your servicer and you agree to. It can range from weeks to months. At the end of that period, you immediately resume making your regular loan payments along with a lump sum amount that was agreed to. So while the money is still due, it provides the homeowner time.
You may also agree to make partial payments for a period of time in order to bring the loan current. However, forbearance is not going to help you if your need for help paying bills is so great or if you are in a home that you flat out cannot afford. Learn more.
Loan modification: You and your loan servicer both agree to permanently change the terms of the mortgage in order to make your payments more manageable over the long term. Modifications can include everything from lowering the interest rate, adding missed payments to the balance, or even extending the length of the time you have to repay. A loan modification is often necessary if you are facing a long term reduction in your income.
In all cases, before you ask for a loan modification or forbearance, you must be prepared to show that you are making a strong, good-faith effort to pay your mortgage on time without this form of assistance. As an example, if you can show that you have reduced other expenses and paid other bills on time, your lender will be more likely to provide you with help and is more likely to negotiate with you.
Selling your home: Of course, selling your house may provide the money you need to pay off your current mortgage in full if you are behind. But check the balance due on the mortgage and compare that to the total value of the home to determine if there is any equity in it. However this is not always possible in this weak housing market.
Bankruptcy: As the very last resort, personal bankruptcy an option. This will usually be a last resort because the results are far reaching and long-lasting. A bankruptcy filing will stay on your credit report for 10 years. It will make it difficult, if not impossible, to buy another home, obtain credit, get life insurance, or, in some cases, prevent you from getting a job.
Still, it is a legal procedure and is always an option for homeowners that can provide needed help. So there are some reasons to do this. It can offer a fresh start for people who cannot satisfy their other debts or bills any other way. Find help with bankruptcy.
Review Chapter 13 bankruptcy. If you have a regular income stream, Chapter 13 may allow you to keep property, like a car or mortgaged home, that you may otherwise lose. This is yet one more options to consider when all other resources have been explored.
In a Chapter 13 bankruptcy filing, the court will approve a repayment plan that will allow you to use future income to pay your bills and debts during a limited three-to-five-year period and keep the property. After you have made all the required payments that you were behind on under the bankruptcy plan, you will receive a discharge of certain debts. This type of filing will often allow the individuals the ability to stay in their home.