There may be many reasons why a homeowner is not able to make a mortgage payment. It could be a recent divorce, unemployment, medical debt or maybe you purchased a home using an adjustable rate mortgage and the monthly payment has gone up considerably. But the fact of the matter is, you do not have to fear that dreaded word of foreclosure. There are many alternatives to avoid it. Here are some ways that can help
• Contact your lender and set up a repayment plan In order for this alternative to take place, it is very important to contact your mortgage lender as quickly as possible, preferably the first month of delinquent payment. Explain to them your situation and ask about the possibility of a repayment plan or suspension of payment. Most of the time lenders will work out a plan unless they find you an extremely high risk. Be prepared to share your personal finances with them.
• Modify your mortgage by extending the life of the loan This can be done by your mortgage company if you explain to them your reason for not being able to make payment. Lenders can modify your loan by refinancing, extending the loan terms, lowering the interest rate or rolling the delinquent debt back into your loan. All of these ways can help you tremendously catch up and be current with your mortgage payments.
• Sell your house before foreclosure If your lender allows you to, you can sell your property for an amount less than amount you owe to the lender. If you can sell your house, the lender will take the proceeds and usually forgive the remaining debt you owe. According to the U.S Department of Housing and Urban Development, you may qualify for this if your loan is at least 2 months delinquent, you are able to sell the house within 3-5 months and if you get a new appraisal for your lender.
• Last Resort voluntarily give back your property to the lender This is called Deed-in-lieu of foreclosure. This will not save your property, but it is not as damaging to your credit as foreclosure. You may qualify for this if you did not qualify or were unable to do the other options or if you were unable to sell your house before foreclosure. Your lenders make the decision on this one, so again it is very important to explain your situation in details and give them all the information they need.
Below is a time line of the foreclosure process so you can see when to take precautionary action in avoiding foreclosure
Day 1 Mortgage payment due today. Borrower misses payment.
Day 16-30 Late charge assessed on payment. Mortgage lender starts making phone calls to you regarding missed payment.
Day 45-60 Lender sends demand or breach letter to you explaining that the terms on the loan were violated.
Day 90-105 Lender hires local attorney to initiate foreclosure proceedings.
Day 150-415 Property is sold in auction.
Day 150-415+ After the sale, some states grant you a redemption period in which you can still re-buy the property if you get your finances in order.
In conclusion, if you are afraid you might fall behind in mortgage payments in the near future or if you already have fallen behind in payments, it is very important to contact your lender immediately and let them know your circumstances before they start harassing you.