What Happens When You Fall Behind?
First, you’ll be charged a late fee if you haven’t paid your mortgage within 15 days of the due date. Your loan will officially go into default if you’re still unable to make your payment after 30 days. At that point, your lender will report your overdue payment to credit bureaus, and it will impact your credit score.
When Foreclosure Starts
The foreclosure process can start when you’re more than 120 days past due. This is when the lender takes possession of the home and removes you from the property. The actual legal process for this varies by state. The goal is for the lender to sell the property, using the proceeds to pay off your remaining mortgage balance. This might sound like the solution to the problem because you’re no longer responsible for the remainder of the loan, but you could be required to pay the difference if the proceeds from the sale don’t cover the full loan balance. This is called a “deficiency judgment,” and it requires additional legal action on the part of your lender.
Options If You Can’t Pay Your Mortgage
Contact your mortgage company right away to find out whether there are any programs available that might be of help to you. You might be able to qualify for a temporary payment reduction, or refinance for a lower payment, depending on where you live and whether you’re past due on the loan. Here are some other options:
A forbearance plan: This allows you to make reduced payments, or sometimes no payments at all, for a period of time if you’re dealing with a temporary hardship. A loan modification: Your lender might be willing to modify your loan to make your payments more affordable. A deed in lieu of foreclosure: You can voluntarily give ownership of your property to the lender in exchange for total or partial debt forgiveness. This is usually only an option if foreclosure is imminent. A repayment plan: These plans are designed for borrowers who are a few payments behind. They allow you to pay a higher monthly payment until you’re caught up on your past-due balance. A short sale: A short sale lets you sell the property for less than your outstanding mortgage balance. It requires lender approval.
How To Avoid Falling Behind
Working a few temporary jobs can help you stay in your home and avoid falling behind if your problem is a temporary income issue. Taking in a roommate might also be an option, depending on your circumstances. Additionally, be sure you’re financially ready to buy a home. This can involve a few steps: You should generally plan to stay in your home for at least five years to break even on the purchase. You might plan on upgrading in a few years if you’re buying a starter home. If you’re in a profession that requires you to move frequently, you need to take that into consideration as well.
