For most families, a home is not only a significant financial investment but also a source of pride. A loss of a job, medical expenses and other life-altering occurrences can happen to anyone, causing us to fall behind in our loan payments. If we neglect paying our credit cards it hurts our credit rating. If we stop paying our home loan, however, the situation is even worse the lender can foreclose, taking ownership of the home.<br>If your family is facing any of these changes and cannot pay your bills, now is the time to look closely at what you owe and what you earn. Eliminate unnecessary spending and reach out for help if you still can't meet your financial obligations. Taking action now can help you protect your family from the loss of your home.
Steps To Take When You May Be Unable To Pay Your Mortgage
First, contact your lender as soon as possible. Many people avoid calling their lenders when they have money troubles. However, lenders want to help borrowers keep their homes. Foreclosure is expensive for lenders, mortgage insurers and investors. Besides, HUD/FHA, private mortgage insurance companies and investors like Freddie Mac and Fannie Mae require lenders to work aggressively with borrowers who are facing money problems.
Your lender may have workout options to help you keep your home. Remember, these options work best when your loan is only one or two payments behind. The farther behind you are on your payments, the fewer options you have available.
Don't lose valuable time by being overly optimistic. Contact your mortgage lender to discuss your circumstances as soon as you realize that you are unable to make your payments. While there is no guarantee that any particular relief will be given, most lenders are willing to explore every possible option.
Information To Have Ready When You Call Your Lender
To help you, lenders typically need:
·Your loan account number
·A brief explanation of your circumstances
·Recent income documents (such as Pay stubs; Benefit Statements from Social Security, Disability, Unemployment, Retirement, or Public Assistance. If you are Self-employed, have your tax returns or a Year-to-date Profit and Loss Statement available for reference)
·List of household expenses
Expect to have more than one phone conversation with your lender. Typically, your lender will mail you a "loan workout" package. This package contains information, forms and instructions. If you want to be considered for assistance, you must complete the forms and return them to your lender quickly.
Prioritize Your Debts
If you are under money strains, getting by will require a new, tightened budget. Nows a good time to prioritize your bills and pay those most necessary for your family: food, utilities and shelter.
Failing to pay any of your debts can seriously affect your credit rating. However, if you stop making your mortgage payments you could lose your house. Whenever possible, any income available after paying for food and utilities should be used to pay your monthly mortgage payments. Take any responsible action that will save cash.
In addition to speaking with your lender, you may want to contact a nonprofit consumer credit counseling agency that specializes in providing help in restructuring credit payments. Free of charge or for a small monthly fee, credit counselors can often reduce your monthly bills by negotiating reduced payments or long-term payment plans with your creditors.
Preserve Your Good Credit
Do not underestimate the importance of preserving your good credit. Your future ability to purchase certain items, rent or buy a home, and complete other transactions often requires a credit check. Consumer credit agencies and your lender can help you explore solutions to keep your credit from getting blemished.
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Reinstatement
Your lender is always willing to discuss accepting the total amount owed to them in a lump sum by a specific date. They will often combine this option with a Forbearance
Forbearance
Your lender may allow you to reduce or suspend payments for a short period of time after which another option must be agreed upon to bring your loan current. A forbearance option is often combined with a Reinstatement when you know you will have enough money to bring the account current at a specific time in the future. The money might come from a hiring bonus, investment, insurance settlement, or a tax refund.
Repayment Plan
You may be able to get an agreement to resume making your regular monthly payments, in addition to a portion of the past due payments each month until you are caught up.
If it appears that your situation is long-term or will permanently affect your ability to bring your account current, your lender may suggest:
Mortgage Modification
If you can make the payments on your loan, but you do not have enough money to bring your account current or you cannot afford the total amount of your current payment, your lender may be able to change one or more terms of your original loan to make the payments more affordable. Your loan could be permanently changed in one or more of the following ways:
oAdding the missed payments to the existing loan balance.
oChanging the interest rate, including making an adjustable rate into a fixed rate.
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