Are you behind on your mortgage payments? Try not to panic you have options. There are different steps you can take when you find yourself in this tough-financial condition. Remember that if you become a delinquent borrower and are falling behind on your home payments, it is essential to take action as soon as possible. Do not ignore the issue, and do not ignore letters and calls from your mortgage lender, either. This will make the issue worse. It is in your great interest to avoid foreclosure, as it can have serious effects on your long-term financial health.
Contact Your Mortgage Lender
It is all too simple to get cynical about mortgage lenders as well as assume the worst about their intentions. Or while their interests frequently do not align with yours, in one respect they do: lenders need to avoid foreclosure nearly as much as you do. Foreclosures are expensive for lenders, and they come out behind when the loan goes to foreclosure auction. So, lenders do everything they may avoid foreclosing and need to get you, the homeowner, back on track with making payments. There are many ways lenders can work with you to avoid foreclosure, keep you in your house, and recover the money they lent you.
Reinstatement and Forbearance
One option lender considers called reinstatement or forbearance, includes temporarily reducing and even suspending your monthly payment. The unpaid mortgage payments do not easily disappear, however. when the forbearance period is ended, you will owe them the balance in a lump sum. Yet, in the meantime, it offers you breathing room to get back on your feet. Or in the interim, the lender reports your mortgage as current to the credit bureaus, so you do not suffer damage to your credit score. This choice works well for people with fundamentally sound finances who discover themselves in an abrupt temporary crisis. For instance, a homeowner with a sizable salary who faced a medical emergency but can resume work soon is an ideal candidate for reinstatement or forbearance.
Negotiate a Payment Plan
If you had a financial hiccup but are back on your feet as well as continuing to earn money, you can frequently negotiate a payment strategy to catch up on your payments. Imagine you lost your job or missed lots of payments, falling $6,000 behind. You recently found a new job as well as began earning again and are a strong candidate for a payment strategy. After discussing with the lender, they allow you to catch up on the $6,000 unpaid balance over the 6 months. Once it gets caught up, you will make your regular monthly payment. Repayment strategies hinge on your income and capability to catch up. Convince your lender that you may bring your loan current if given a chance, and lenders offer it to you.
Talk to a HUD-Approved Counselor
Keep in mind, you do not have to go through this procedure alone. If you will like more guidance than your lender can provide, you can need to talk to a HUD-approved housing counselor. They may help you walk through your options as well as decide which one is a good bet for you. Frequently, they’ll offer their services for free or at a lower price.Refinance
When you refinance your mortgage, you have to pay all-new title fees, lender fees, attorney fees, and recordation fees. It adds up to lots of dollars, which adds to your new principal balance or, therefore, to your monthly payment. All of that makes it less probably a refinanced mortgage can low your monthly payment, which you are struggling to pay. Yet, there are some programs available to help you secure the low possible monthly payment. If you have a Federal Housing Administration (FHA) loan, check out the FHA Simple Refinance program and the FHA Streamline Refinance program, which goal to keep prices low and the timeline quick to help you avoid foreclosure.
Loan Modification
But what happens if you cannot catch up through paying more? If you are earning a regular income, but it is not sufficient to pay down your arrears, most lenders agree to modify your loan to avoid foreclosure. Loan modification options vary widely, but some common include:
- Interest Rate Reduction. In some cases when you had been paying a high-interest rate relative to current rates, lenders can cut your interest rate to decrease your monthly payment.
- Convert Variable to Fixed Interest. If you are paying a variable interest rate, lenders may change it to a more affordable fixed interest rate.
- Reamortize the Loan Term. Another option includes stretching the loan term over a long period to decrease the monthly payment.
- Extend the Balance. If you owe $6,000 in arrears, it easily gets added as more principal at the end of the loan.
- Forbear Some of the Principal. One option in loan re-amortizing base on the monthly payment on a low principal balance than you are owing. The excluded portion does not go away, however. You will pay it back as a lump-sum payment at a time which is determined by your agreement with the lender.
Mortgage Modifications
Mortgage modifications are in the news a lot lately. This’s where the lender reshapes the loan in most way, to make it extra affordable for the homeowner. The lender will modify the interest rate as well as the term of the loan, to decrease the size of the payments. In rare conditions will they modify the principal amount that’s owed. In most cases, it is a permanent restructuring of the loan, and in other cases, it is a temporary change. The goal here’s to make the loan payments more affordable for the struggling homeowner.
Selling the Home
Selling the home can be a choice when you’re behind on mortgage payments and can’t get caught up. Many homeowners in the situation will utilize the short sale strategy, which means the lender lets them sell the house for less than what they owe on the mortgage, to sell it fast. The goal here, once again, is to avoid a long and drawn-out foreclosure procedure. Facing foreclosure isn’t a pleasant experience for anyone, but it doesn’t have to be as stressful as you may think. Contact our team at NexGen Home Solutions, LLC to find out how we can help you get back on your feet and move on.