Falling behind on mortgage payments can be stressful, but homeowners have several options to consider when resolving the situation. Here are some potential steps and strategies to consider:
- Contact Your Lender ASAP: Lenders usually don’t want to foreclose on homes if they can avoid it because foreclosure is an expensive process. Reach out to your lender when you realize you’re having trouble. They may offer solutions or temporary hardship programs.
- Loan Modification: This is a change made to the terms of a loan by a lender due to a borrower’s long-term inability to repay the loan. The loan could be extended, the interest rate might be adjusted, or it could be changed from a variable to a fixed rate.
- Refinance the Loan: If you still have a good credit score and meet certain criteria, refinancing might be an option to secure a lower monthly payment.
- Forbearance: This is an agreement to temporarily allow a borrower to pay less than the full amount of their mortgage payment, or even no payment at all, for a specific period. Interest still accumulates, and you’ll need a plan to catch up on missed payments in the future.
- Repayment Plan: If your hardship is temporary, the lender might offer a repayment plan where you would pay back the missed payments over time, added to your regular monthly payments.
- Short Sale: If the value of your home is less than the amount owed, the lender might agree to a short sale, where the house is sold, and the lender accepts less than the amount owed.
- Deed-in-Lieu of Foreclosure: As a last resort, if you can’t sell your home for the amount of the loan, some lenders will accept the property’s title instead of going through the foreclosure process.
- Bankruptcy: As a last-resort option, some homeowners file for bankruptcy to stop a foreclosure. This is a significant decision that has long-term credit and financial implications, so it’s crucial to consult with a legal professional.
- Housing Counseling: A HUD-approved housing counselor can offer free advice and assistance. They can help you understand your options, rights, and connect you with resources.
- Legal Counsel: Especially in situations where you believe there has been lender misconduct or if you’re considering major decisions like bankruptcy, it’s essential to get advice from a lawyer familiar with foreclosure laws in your state.
- Sell Your Home: If you have equity in your home and feel that the financial burden is too much, selling your home and downsizing might be an option.
- Rent Out Part of Your Home: If feasible, consider renting out a room or section of your home to help cover mortgage costs.
Finally, it’s essential to be wary of foreclosure rescue scams. Some companies and individuals prey on distressed homeowners with promises of help. Always do your research and avoid any “solution” that sounds too good to be true.
Every homeowner’s situation is unique, so the best approach will vary based on individual circumstances. Whatever the case, the sooner one acts and seeks guidance, the more options will generally be available.
The homeowner can always give me a call for a confidential conversation.