Losing your home is a scary prospect. But being unable to pay their mortgage happens to more people than you may realize. You may have lost your job, had your hours cut back or are coping with a pile of medical bills. Many things can cause you to get a little behind on the bills.
Though it may be embarrassing, you will be better off if you deal with the problem as quickly as you can.
Read all lender correspondence
As soon as you realize you cannot make a payment or after you receive a notice from the lender, you should contact your lender. It is important that you do not ignore correspondence from your lender because that can include options to help you stop foreclosure. Remember, the lender does not really want your house. They would much prefer your money.
Go over your bills
You should go over your budget. Make a list of all your bills like your mortgage, car payment, internet and groceries. Maybe you can downgrade your cable package or shop at cheaper grocery store. Perhaps you can forgo your morning coffee, and bring your own coffee. Adding up a lot of little things can make a big difference on your budget.
Talk to your lender
Assuming you have not received a Notice of Default, you can likely still negotiate with your lender. It is even better if you have not missed a payment yet. Go in and talk to your lender. They may offer to:
· Work with you on a repayment plan. You may add a small portion of your missed payments to your new payments going forward, until you make up the difference.
· Forgive one or two of your payments. This is unlikely to happen, but if you have good credit and a longstanding relationship, it is possible.
· Refinance your loan. Depending on the terms of your loan and what you owe, you may be able to refinance the loan and lower your monthly payment.
· Loan modification. You may be able to apply for a loan modification where you could adjust the terms, like extending the length of the loan. This can lower your payment.
Try to reinstate your loan
If you receive a Notice of Default, you have a very limited time to bring your mortgage payments current before the foreclosure process starts. However, at this point, you also must pay for the cost of filing for foreclosure and stopping the process. Otherwise, your options become even more limited.
Sell your house
You can try to sell your house to avoid foreclosure. However, you will want to ensure your house is worth enough to pay what is left on your mortgage. You will likely want to speak to several realtors.
Consider filing for bankruptcy
You can file for bankruptcy until your home has been sold in a foreclosure sale. Filing for bankruptcy puts an automatic stay in place, which prevents debt collectors from continuing to collect from you. It halts the foreclosure process.
If you file for Chapter 7 bankruptcy, generally your assets are sold off to pay your debts. However, you may be able to exempt some of your property. With Chapter 13, you create a payment plan that restructures your debt. You typically keep all your assets in a Chapter 13 bankruptcy. Your income and your debts may dictate the type of bankruptcy.
Missing one mortgage payment is not the end of the world. However, you should reach out to your lender as soon as you realize you are falling behind. They may be willing to negotiate the terms of your loan with you. If that does not work, you may want to consider some other options.