Behind on Mortgage Payments

Behind on Mortgage Payments

Are you falling behind on your mortgage payments?  If so, this can lead to foreclosure.  Foreclosure is when your lender goes through the legal process of filing lis pendens – the legal process to claim ownership of your home because you have not paid the loan as agreed.  You MUST act quickly!  The longer you wait the greater chances that you will lose your home to foreclosure.  Foreclosure will damage your credit, the lender may be able to get a deficiency judgement for what you owe including attorney fees and other costs, both will haunt you for many years to come.

What to do when you are facing Foreclosure

GET REAL – Create a budget!  You need clear picture of your income and expenses.  If you do a thorough job writing down your income and expenses, you will know whether the difference between the two is just a tiny leak or a gaping hole. You will get a better idea of whether you can afford to save your home, and you will be able to quickly evaluate any offers by your lender to get you back on track.  Make a list of your debts, the interest rates you are paying, and minimum payments. Also make a list of your regular monthly expenses and a reasonable estimate for variable expenses like groceries and gasoline. Finally, be sure to highlight any debts that you owe. For example, if you are behind on your credit cards, utilities, or other bills, make a note of what it will take to catch up.

SCRAPE SOME MONEY TOGETHER –  At this point you should do whatever you can to find the money to pay your mortgage each month.  Your mortgage is considered a priority debt.  After you begin to fall behind on your mortgage you will be on your way to bankruptcy or foreclosure.  If you can manage to pay your mortgage monthly you may want to consider refinancing your loan while your credit is still good.  Once your credit is damaged refinancing is no longer an option.  Another option may be to ask for a mortgage modification to reduce your payments to a level you can afford.  Your lender will make the decision whether or not you qualify for this modification.  If your credit is poor or you have no income you will not qualify.

ASK FOR A BREAK – Lenders do not want to take your home away from you. It is expensive and time-consuming. Lenders have employees whose job it is to try to help you work something out to save your home. That may include allowing you to make lower payments for a period of time, or tacking missed payments on to the end of the loan. To decide whether you truly qualify, the lender will require you to fill out paperwork demonstrating the hardship and your ability to get back on your feet. That is where the budget you created will come in handy. Be certain to get any agreements about payment arrangements in writing, and keep a file with copies of correspondence with the lender.

GET HELP Department of Housing and Urban Development–  If you can not work things out with your lender.  You can search the website for a list of HUD-approved counseling agencies that may be able to you avoid foreclosure.  If you currently have a Federal Housing Administration (FHA) or VA loan, you should definitely contact one of these agencies for help.  These loans come with some good programs designed to help you keep your home.

Solutions that will CO$T you Money

FILE FOR BANKRUPTCY – A bankruptcy attorney can help you to decide whether it makes sense to file in order to keep your home.  Sometimes holding on to your home my be impossible.  You need to be able to recognize when it is time to let go, before you lose your house.  If you decide to sell, you must be realistic about the sales price and what you owe on your mortgage.

DEED IN LIEU –  A deed in lieu is deeding your home to your lender.  You will no longer owe the debt but you will owe state and federal taxes as if the debt were a gift of income to you.  Your home is no longer yours and you will need to vacate immediately.

Solutions that will NOT COST you Money

SHORT SALE –  If you owe more on your mortgage than your home is worth, if you are past due on your mortgage payments, if your home is in need of repairs then a short sale is for you.  A short sale is NOT a quick sale.  A short sale will pause the foreclosure of your home.  This can buy you time to get moved into another place to live.  You will need a realtor to list your home for sale and negotiate with your lender.  All lenders will require you to complete short sale paperwork.  This paperwork is a detailed budget of your current finances.  Including your income and expenses.  Banks will require to see your pay stubs, bank statements, tax returns,  and other financial obligations.

 

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