Behind on your mortgage payments? It happens all the time. A homeowner takes a mortgage out to buy their dream home, only to find out that a few years later they are unable to make their payments. Whether it is losing your job or some other financial challenge you’re not alone if you find yourself in a situation when you are no longer able to pay your mortgage.
In this article, we cover what you can do to get out of this situation and put yourself back on track.
First, Don’t Panic.
We get it. It can be kind of scary when you realize that you can no longer afford to pay your mortgage, you miss a payment or two and you start to receive notices in the mail.
Panic can set in and all types of doomsday scenarios will enter your mind. That’s why our first piece of advice is not to panic. There is a way to fix this.
The best thing to do is to analyze your current situation and explore every possible option available to you. We make poor decisions as humans when we are panicking or feeling rushed so it’s best to take a deep breathe and understand that you have options and it’s not the end of the world.
Second, You’re Not Alone in Missing Your Mortgage Payments.
According to the FDIC, every three months, 250,000 new families enter into foreclosure and more than 6 in 10 homeowners delinquent in their mortgage payments are not aware of services that mortgage lenders can offer to individuals having trouble with their mortgage.
In a study done by the Homeownership Preservation Foundation data of 60,000 homeowners, there are a few tipping points that force homeowners to miss their payments.
These reasons include:
- 32% experience a job loss
- 25% experience a health crisis
- 85% have already missed one mortgage payment
- 50% have already missed two payments
- Most have no savings, no available credit, and their extended families have limited resources.
- Most have first-time loans, and most loans are less than three years old.
- They may have already refinanced two or three times.
So if you feel like your alone in this situation your not. Plenty of people have navigated their way out of this rut and you can too.
Know Your Options
When behind on your mortgage it’s important to know all of your options. Here are some of the best options we recommend to get you started.
1. Contact Your Mortgage Company
The first step, and often most important that most people never think about is simply to call your mortgage company and ask about your options.
You’d be surprised at how many options they may give you to help you catch up on payments or improve your situation.
2. Set Up A Repayment Plan
Your mortgage lender may be able to offer you a repayment plan to help give you a chance to catch up on payments.
According to Fannie Mae, a repayment plan may be an option for you if:
- You are ineligible or don’t want to refinance
- You are facing a short-term hardship
- You are a couple (or several months) behind on your mortgage payments
- You can now afford your monthly mortgage payment
This is often the best initial option if you are just suffering some financial hardship like a job loss and need some time to get things back to normal temporarily.
3. Refinance Your Loan
Refinancing is another option for you if you are facing difficulties paying your mortgage.
Refinancing may be best for you if:
- You are current on your mortgage payments (but expect to fall behind)
- You have an adjustable rate mortgage or a high-interest rate that is becoming unaffordable
- You have equity in your home
If you haven’t been late on your mortgage payment in the last 6 months, you may also qualify for the government’s Home Affordable Refinance Program (HARP).
4. Get A Loan Modification
This is another option to help you the borrower make your payments more affordable.
There are 2 main types of loan modifications that may apply to your situation.
Flex Modification – With a Flex modification the earlier you apply the better. A flex modification can lower your payments up to 20% by adding the late balance to the end of the loan and recalculating the loan balance with new payment terms.
Disaster Relief Modification – If you’re unable to pay your mortgage payments because of a disaster you may be eligible for a disaster relief modification. You can be given a forbearance for up to 12 months to help while you recover from the disaster. Once the forbearance is over you have a few options including Reinstatement, repayment plans, extended modifications, or flex modification as mentioned before. For more details on disaster relief modifications, this guide from Freddie Mac will help.
Again, you have options but if you are considering a loan modification it’s important to contact your mortgage lender to find out what will work best for your situation.
5. Ask for Forbearance
A forbearance is another reliable way to help you if you are behind on your mortgage payments with your lender. Your mortgage company may agree to temporarily suspend or reduce your monthly mortgage payments for a specific period of time to give you time to get back on your feet.
Forbearance may be an option if:
- You are ineligible or do not want to refinance
- You are facing a temporary hardship
While forbearance may affect your credit, it is much less damaging to your credit score than a foreclosure.
Again, contact your lender to discuss forbearance options, length of the forbearance period, reduced payment amount, and terms of repayment.
6. Use Your Military Options
If you are in the military you have options available as well. Service members specifically have protection against foreclosure 12 months after termination of duty.
You may be eligible for military options if:
- You’ve received Permanent Change of Station (PCS) orders
- You’re in active duty service (or just left)
- You (or your spouse) have been injured in active duty
If you need additional information or want to speak with someone right away, call 800-2FANNIE (800-232-6643) and tell them you’re in the military.
7. Short Sale Your House
If staying in your home is not your preference or the options above did not work for you, you may want to consider a short sale. A short sale is selling your house for less than you owe on the mortgage.
We have a detailed guide on short sales, however, the basic summary is that your lender must first agree to do a short sale for you to sell the home at a discount to pay off the remaining balance of your loan.
If a short sale is successful, you can pay off your loan balance, avoid foreclosure, and move on without having to keep the house.
8. Get A Deed-in-Lieu of Foreclosure
A Deed-in-Lieu also called a mortgage release, is another option for escaping a possible foreclosure. In this process, you transfer ownership of your property back to the bank in exchange for the release of your payments.
While this may sound like a great option of being able to give back your mortgage with no consequences, it doesn’t always work that easily. Banks are not in the business of real estate, they prefer loaning money, so they are not always open to this option.
Also, the effects on your credit may be similar to a foreclosure and remain on your credit for up to 7 years.
9. Sell Your Property Fast to Avoid Foreclosure
The best option if you’re looking to get out of your mortgage payments and avoid foreclosure may be just to sell your house.
There are a few options for selling your house:
Sell with a Realtor – This is the traditional path. You can list your house with a Realtor to sell it for you. Keep in mind you will need to wait until the house is sold and continue making payments the entire time. If you cannot afford the payments you will start to fall behind until the house is sold, however long that may be.
Sell to an Investor – This option is much faster than selling via the traditional route with a Realtor. When selling to an Investor or investment company like Property Nation, they are the buyer so there is no reason to wait to find the buyer. As investors, we pay in cash so there is no waiting for a loan approval or other time-consuming processes.
Additional Benefits of Selling Your Home to a Real Estate Investor
Selling a property to a real estate investor offers a number of important advantages. Now, we’ll explain to you how you can benefit from selling your home to an investor.
Get paid in cash – Real estate investors make an offer in cash for your house. That means that you’ll be able to get cash now if you choose to accept the offer.
Sell in any condition – Investors buy properties “as-is” so there is no need to fix up the house or do any repairs. Money may already be tight as it is so you may not have the extra cash to pay the mortgage let alone fix things. Unlike selling in the traditional route, investors love properties that need some work.
Sell your house faster – Unlike traditional buyers, real estate investors buy fast. In many cases, your house can be bought in just days. In a traditional buying process, your buyer must get approved for financing, do home inspections and so on. But if you decide to sell house fast Miami to a real estate investor, you can skip these steps and close a deal much faster.
Take over mortgage payments – In some cases, as investors, we can even take over your mortgage payments. This can be a great option if you can’t immediately sell the home and can no longer afford the payments.
Not sure what options to choose or need some help? For some guidance and a confidential cash offer on your home, contact us today.