What if I Can't Make a Mortgage Payment?
A financial setback, job loss, or change in the family status can have devastating effects on your ability to pay your mortgage. The worst-case scenario being what if you can't make that mortgage payment?
Finance experts such as Dave Ramsey and Suze Orman insist on making mortgage payments first and this truly is one of the smartest things to do. Human beings need shelter and your mortgage payment should be one of the very first things you make, followed by food, heat and lights, and then miscellaneous items such as credit cards or car payments. You need a place to live in that mortgage payment should be the top priority. The people manning the phones at mortgage companies care more about you making that payment than those working at the credit card company. Let that sink in. Your mortgage company or lender truly cares that you stay in your home and has implemented programs and policies to keep you in your home. Your credit card company doesn't care and will send you to collections at the drop of a hat. This is why your mortgage payment needs to be a top priority in your monthly payment but what happens if you can't even make that payment?
Not just a saying from The Hitchhikers Guide to the Galaxy, this is truly what you need to keep in mind if you're struggling to make a payment or you're facing missed mortgage payments. There are several options that can help you avoid the ramifications of foreclosure and keep you in your home, even in the midst of a financial hardship.
Here are the options you can choose if you're facing a missed payment, have already missed a mortgage payment, or worried this reality is on the horizon.
The Department of Housing and Urban Development offers financial counseling and foreclosure avoidance assistance. Their counselors can help you understand your options, offer budgeting, debt consolidation, and other options to keep you in your home. Make sure you gather all financial documents as well as income and asset documents.
You can call your lender at any time and ask what their options are. Again, they want to keep you in your home so the sooner you let them know about financial hardships, the sooner you can start to make moves to help you get out of your current situation and keep you in your home.
If you are current with your mortgage payments a refinance might be a great way to skip a month or two in mortgage payments and lower your interest rates or allow your lender to structure more affordable monthly payments.
This is a short-term solution in where the mortgage lender defers any foreclosure proceedings if you work up a plan to bring your loan up to date. Lenders may modify the mortgage, reduce or suspend payments during a specified time and allow you to catch up.
This works if you're already behind on your mortgage. You may be able to negotiate a different repayment plan with the lender before going to foreclosure. They may split up what you owe across 3 to 6 months until you become current.
Your lender may be able to work up a mortgage loan modification but you will probably need to speak to a real estate attorney to set this up. Borrowers must submit financial documentation and there's an initial trial. But this is worked in the past for many people facing a hardship.
Selling your home.
If you don't think that you can work with altered payments or budget you may be able to sell your home several different ways.
If you are current with your mortgage you may be able to list your property for top dollar with a real estate agent. If your home is in market ready condition, this could be a great way to get out of the financial burden of a mortgage payment until you get back on your feet.
A short sale may also be an option if you're currently behind or underwater on your mortgage. If you can't make your mortgage payment or your property is worth less then the amount you owe, your lender may agree to sell the home as a short sale. This relieves your monthly mortgage payment while the property is on the market and it will do less damage to your credit than a full foreclosure.
Deed in lieu of foreclosure.
This is technically the last option for borrowers. If all these other options have not worked you may be forced into a deed in lieu of foreclosure. This allows all parties to avoid the lengthy and expensive foreclosure process and is far more private than a typical foreclosure option. You will basically hand over the property deed to your lender and are released from all obligations of the mortgage. However, this will have the most damaging affect on your credit history.
One final note: avoid scams. There are thousands of people out there that are ready to promise a quick fix to a dire situation but without the right advice, anything that sounds too good to be true often is. Never sign any legal documents without the advice of a real estate attorney even if it costs you a little bit more. Don't listen to any company that advises you to stop paying the mortgage or reroute your mortgage payment to another party.
If you have more questions on this topic feel free to give us a call. Selling your home outright or through a short sale may be the best option as well, which we can help with. Give us a call today and let's get you started