Your mailman must be conspiring with your mortgage lender when it comes to forcing you to make your loan payments. The moment you get the late notices in the mail, your phone rings. It’s your lender on the other end of the line as he wants to know when you are going to catch up on your back payments.
Don’t hang up that phone! You don’t have to hide from your lender all because you are falling behind on your mortgage. Pull up that big girl/boy underwear and take charge of your financial life. There are steps you can take to get your mortgage payments back on track.
1. Contact your lender immediately. You will have more options available if you are just starting to fall behind on payments or if you believe you will fall behind in the near future. The deeper in debt you become, the fewer choices will be open to you because you will owe too much in back payments.
2. Get on a repayment plan. Pick this option if you have only missed a few payments and you are sure you can catch up on them. To make things easier on you, the lender will place a portion of the past due amount onto your current payments. Then the lender will give you a set amount of time to make these payments.
3. See if you qualify for a loan modification. A loan modification will allow you to change certain terms in your mortgage contract so you’ll be able to make payments. According to the Federal Trade Commission (FTC), you may be able to have part of the debt you owe forgiven, have your interest rates lowered, get an extension on the loan term, or transfer the amount you owe in missed payments onto your loan balance. Choose this option if you will be in your financial situation for a longer length of time — such as having your job salary reduced.
4. Ask for a forbearance. The lender will suspend or reduce your mortgage payments for a specific amount of time as this allows you to get back on your financial feet. After the timeframe ends, you start making your regular payments along with back payments until you are current. This option is good if you are going through a temporary situation, such as a medical surgery or recovering from an injury, where you will return to work soon.
5. Sell off your home. If you have a home you simply can’t afford, you may be able to sell it if the home has appreciated in value. You can use the money you gain to pay off your mortgage debts in full. It can feel terrible to sell your home. Yet if you truly cannot afford to make payments as you are struggling to put food on the table and provide for your family’s needs, this may be your best option.
6. File for bankruptcy. Only choose bankruptcy as a last resort when the lender won’t agree to put you on a repayment program or give you a loan modification. Having a bankruptcy on your credit report for 10 years will prevent you from purchasing another home or getting credit. Yet it can allow you to keep your current home as the court can place you on a repayment program you can afford. You’ll need to file for a Chapter 13 bankruptcy and show you have a steady income to be placed on a three-year to five-year repayment program. If you make all the required payments, the rest of your debts will be absolved.
These are just a few of the options you can seek out when you fall behind on your mortgage payments. Your lender may be able to offer other options that work better for your situation. Ensure you get detailed information in writing from the lender before agreeing to any repayment program. Only pick the one that will help you get out of debt without draining your finances to the point where you can’t pay for your basic needs.