Nobody wants to imagine the worst possible scenarios. But different situations happen in life. Suppose a person is experiencing financial difficulties and can no longer pay their bills. In addition, the average mortgage rate today is higher than in the last 15 years. Let’s see what happens if I can’t pay my mortgage. Does instant eviction threaten, and what kind of assistance should I apply for?
What happens if I can’t pay my mortgage? A brief retelling of events:
- First of all, you will be fined for being late.
- After 120 days of non-payment, the foreclosure process starts.
- Homeowners can try to avoid foreclosure and seek help from The Department of Housing and Urban Development housing counselors.
What happens if you need to catch up on your mortgage payment?
The first thought is eviction. We will reassure you here, but eviction is an extreme measure that will most likely not come. First, you will be charged a late fee if you have not paid within 15 days. If your loan payment is delayed by 30 days, it will be automatically declared as defaulted.
Most often, lenders appoint a so-called grace period for monthly payments. You still have a few days to settle the payment to avoid incurring any penalty charges. But, the lender is still required to report the delay to the credit bureau, and the delay in payment will affect your credit score.
When does the foreclosure process begin?
If you are overdue by 120 days, the foreclosure process begins. The lender takes possession of the house at this stage, and you must leave the property. Now the lender’s main goal is to sell the property. The proceeds from the deal will help cover the rest of your mortgage balance.
But you still owe the lender something and are fully capable. The borrower may still be required to pay the difference from the sale that does not cover the full amount of the loan. Your lender may need to intervene further through a process known as a deficiency judgment.
What are the options for solving the problem?
There is always a way out. Thankfully, a solution is available even if you cannot make payments on your mortgage. Or, at least, you can minimize the consequences.
Tell your lender about your debt problems
The first step is to contact the mortgage company, announce the problems and ask if any assistance programs are available. Take your time with payment and tell them right away that you won’t be able to deposit the required amount. The sooner you tell about it, the more options for help you will be offered. Therefore, pick up the phone and immediately say that you will miss the payment of the payment.
If I can’t pay my mortgage — what to tell your lender:
- Your current income and future income (if you foresee an increase in it).
- Your current expenses.
- Your latest mortgage statement.
- Causes of hardship — that is, what made your financial situation change.
There is hope that you can find a way to meet in the middle and receive assistance in navigating a challenging financial situation. For example, you will receive a temporary payment reduction or the opportunity to refinance. Of course, all this is decided individually and depends on your situation, place of residence, and type of property.
Remember that refinancing will only help lower your monthly payment if you refinance the loan for longer. In addition, it will increase the amount of interest for the entire term of the loan.
Contact a HUD housing counselor
Try asking a HUD housing counselor for help — together you can work out a course of action for your situation. And also calculate the budget and predict your financial situation.
Help options:
- A deferral plan — is the ability to make smaller payments or not pay for a certain period. Suitable for those who are experiencing temporary financial difficulties.
- Loan Modification – the lender will make the payments more affordable, especially for you.
- A deed in lieu of foreclosure is the process by which you voluntarily transfer property ownership to a creditor. In exchange, you receive a full or partial write-off of the debt — an option for the case when foreclosure is inevitable.
- A repayment plan for borrowers who are past due on multiple payments. You can pay a higher monthly fee until you pay the overdue balance.
- A short sale is the ability to sell a property for less than your outstanding mortgage balance. For this action, you will need the approval of the lender.
Here are a few more tips for those who have difficulties with a mortgage
- Document each step — for example, when exactly you called the lender, what answer, and when you received it. Keep all documents and messages in a separate folder. This information can be beneficial in your case in the future.
- Follow the deadlines — yes, we understand sometimes you want to escape from all this. But it’s better to start keeping your financial calendar immediately and mark any deadlines the lender gives you. In addition, you will feel much calmer.
- Pay close attention to living conditions. For example, if you are considering renting out your home, check if this meets the requirements of your mortgage program. In some cases, the borrower must reside permanently in the purchased property.
- Check any information on the Internet. It’s all too easy now to stumble upon websites that will tell you about available government mortgage assistance programs. In fact, this is not true — we advise you to contact the lender, who will provide you with the most up-to-date information.
- Ask for help — not friends or neighbors, but immediately to the lender. You may feel embarrassed, but this will help you get quick and qualified support. You can also speak with a Department of Housing and Urban Development consultant — the nearest expert can be found on the HUD website.
- Remember that getting help with mortgage problems is free. Therefore, do not fall victim to scammers; know that a HUD consultant can and should help you for free.
How to avoid late payment?
The most banal option is to try to increase your income. Of course, if your problem is related to decreased financial resources. You can find a part-time job or rent out part of the property.
Before you take out a mortgage, take a few important steps:
- Save up for a bigger down payment, and you’ll get ownership of the house right away. This will help protect you from higher payouts in the future.
- Deal with your debts — credit cards, student loans, medical debt. There is simple logic at work here. The less obligation you have, the easier to make mortgage payments on your property.
- Stay under budget — only buy a house you can afford. Of course, you always want to choose the most comfortable option, even if it is “a little” over the budget. We strongly advise against doing this as your income may fluctuate unpredictably.
- Take out a mortgage for the amount that you can afford. Even if your capital decreases a little. This way, you will feel calmer and more confident.
What happens if I can’t pay my mortgage? Conclusion
What happens if I can’t pay my mortgage? To get started, contact your mortgage company immediately if you feel more than 15 days behind on your payment. The sooner you tell about your financial situation, the more likely you will be helped and be able to save your house.
A consultation with LBC Mortgage will also help you understand the complex world of mortgage finance. We are always happy to help answer all your questions: from finding mortgage programs to refinancing issues. Sign up for a consultation to save time and money!
