If you experience financial trouble that may jeopardize your mortgage payments, ask for help. Timely action can make the difference!
Contact your lender as soon as possible if you are having trouble making your mortgage payments. Ask the lender what the options are. Don’t ignore the problem or correspondence from the lender, as late charges (and other fees) can pile up, compounding the problem. Be realistic about your financial situation. Since each person’s situation is different, there may be a range of solutions. For instance, some borrowers may fall behind temporarily due to a change in work status, health issues, or other short-term economic changes. Other borrowers may have long-term problems in their ability to pay a given mortgage because they could not afford the loan in the first place or their Adjustable Rate Mortgage (ARM) rate has increased. If you’re behind in your payments, consider the following tips:
- Find a Reputable Mortgage Counselor
Contact the U.S. Department of Housing and Urban Development (HUD) to find an approved counselor. A reputable counselor may be able to help you locate funding assistance or negotiate a solution with your lender.
- Request a Loan Modification
The lender may be willing to permanently modify the terms of the loan to make it more affordable for you. For instance, if you have an ARM that is set to increase more than you can afford, ask the lender to modify your mortgage into a fixed-rate loan that you can afford.
- Refinance with a New Loan
You may be able to find another lender that will give you a loan with better terms (such as a fixed rate) that are more manageable. Before pursuing refinancing, however, review your current loan to determine whether it contains a prepayment penalty. Be on the lookout for refinance scams, and don’t feel pressured to make a decision right away. Although rates may go up or down, taking a day or two to consider your refinancing options should not alter any refinance offer too drastically.
- Consider Reinstatement
Under a reinstatement, you pay off the past-due amount and any fees in order to bring the mortgage current again. Reinstatement may be a good option if your default was caused by temporary financial fluctuations that you are able to rectify.
- Ask for a Forbearance
A forbearance may reduce or temporarily suspend your monthly payments until a set date, allowing you to get back on your feet and begin repaying the mortgage.
- Set up a Repayment Plan with the Lender
Ask the lender to allow you to pay the past-due amount in partial payments with each of your monthly payments, rather than all at once. This may be more manageable than having to pay back the past-due amount all at once.
- Ask the Lender to Waive Fees or Penalties
A lender may be willing to waive fees, penalties, or other charges if it believes in good faith that a resolution can be reached where you can begin making timely monthly payments and repay the past-due principal and interest.
- Explore Selling the Home
In some cases, selling the house may be the best option. If you have equity built up in the property, meaning you owe less than it is worth, this may allow you to benefit financially and perhaps afford another home.
Did you know there are special protections for renters who have a landlord going through foreclosure? The Protecting Tenants at Foreclosure Act provides a number of protections including 90-day notice before eviction.