Like millions of other Americans, you may have been faced with difficulty keeping up with your house payments. Instead of defaulting, you may be able to get help with mortgage payments and actually remain in your home.
To do so, you must make sure that you select the best option for getting your mortgage payments back on track. The first step is to contact your mortgage company directly to determine if they can make reasonable accommodations to allow you to better afford your mortgage. They have a lot of available options.
30 Days Delinquent on Mortgage
If you are a month behind on your mortgage payments, you should contact your lender to determine what they are willing to do to help you get back on track. Your lender may send you a booklet titled “How to Avoid Foreclosure”, which they are required to send by the time you are 60 days delinquent.
In this early intervention period, there are three available options if you want to avoid default:
60+ Days Delinquent on Mortgage
Once you are falling more than 2 months behind on your mortgage payments, you may need to consider some of the more serious loss mitigation options that are not available to those in the early stages of delinquency. Again, if you want to lose the house, then a pre-foreclosure sale (called a short sale if negative equity exists) or deed-in-lieu are preferred options to foreclosure.
In order to keep the home, you have four options:
- Catch up the arrears
- Special forbearance (must be 90+ days delinquent)
- Loan modification (must be 90+ days delinquent)
- Partial claim (must be 120+ days delinquent)
Any of the above options is preferred to foreclosure. If you are falling behind on your house payments and are concerned that you may be at risk of losing your home to foreclosure, then you need to understand how much time you have available to make a move. You will need to understand the steps of foreclosure so that you know how much time you may have available before your home is seized by the lender and subsequently sold.
Keep in mind that the above options are based on FHA guidelines. If your mortgage loan is backed by FHA, the lender may have financial incentives from FHA to work with you and help you avoid defaulting on your mortgage.
Finally, you should avoid loan modification scams and other mortgage rescue scams that promise to be able to intervene. After all, why should you send them $3,000 when you could have sent that to your lender?
One initial option is only open to those who have great credit, no recent delinquencies and solid income. If you owe substantially less than 80% of the value of your home, you may be able to obtain a HELOC to raise extra cash to get you through an expected future cash shortfall. This is not recommended though, since 70% of households that open a HELOC to pay off debt end up in worse shape within just a couple of years.