Bad things can happen to just about anyone. A medical emergency, a natural disaster, a house fire, almost anything can make paying your mortgage seem impossible. Before you know it, you have your mortgage company calling your home at all hours of the day and night, demanding immediate payment and threatening to foreclose upon your home. But all hope isn’t lost, as there are several options available to you to stop your foreclosure and save your home.
Get a Mortgage Forbearance
If you’ve only missed a month or two, your best bet is forbearance. Forbearance is a situation in which your mortgage payments are put on hold for a specific period of time. The interest will continue to accrue on the loan, and (most importantly) you will still owe the payments that were delayed. In most cases, your mortgage company will require the payments in a lump sum at the end of the forbearance. Forbearance is, however, one of the simplest ways to resolve a problem with your mortgage payments in that it usually only requires a phone call to your mortgage company. For those with a relatively clean payment history and a small bump in the road of life, forbearance is a great option to save your credit rating as well as stop your foreclosure.
Loan Modification May be the Answer
For people who do not have the funds to make this lump sum payment, a loan modification may be a more effective option. In a loan modification, the mortgage company most often adds the payments due on to the end of the loan. The difficulty, though, is that the mortgage company also adjusts the interest rate. Often, the interest rate moves to one offered to those who have defaulted on their loans. This bump in your interest rate can add hundreds of dollars to your monthly mortgage payment. To qualify for a loan modification, you must contact your mortgage company and ask for the appropriate paperwork. A mortgage lender, however, may deny your loan modification if your credit history is too spotty to ensure that you’ll make the new, higher mortgage payments.
When you don’t qualify for forbearance and the interest rate on the loan modification gives you pause, it is smart to investigate refinancing your loan. There are many lenders who specialize in refinancing loans for people who have experienced a temporary setback as well as those who have poor credit. It’s best to shop around for the best possible terms in a refinancing; it’s equally important to ask for a Truth in Lending statement from your mortgage provider to ensure that you know exactly how much you’re paying both upfront and over the life of your mortgage. After all, refinancing to a mortgage that you can’t pay any better than your current one only delays your foreclosure, it does not stop your foreclosure.
About Short Sales
In today’s real estate market, many people are finding that they owe more on their mortgage than their home is currently worth. This can present a difficulty when a person just wants to sell their home and try to move on without a foreclosure on their credit report. In this situation, your mortgage company may very well agree to something called a short sale. In a short sale, your mortgage company agrees to accept less than the amount remaining on the mortgage when you sell your home. Most often, you must be behind in your payments (usually three months or more) before your mortgage company will discuss a short sale with you. While the short sale won’t save your credit report from late payments being reflected, it will stop your foreclosure and allow you to move on with your life after finding a buyer for your home.
Unfortunately, many parts of the country are now experiencing a real estate slowdown that is keeping houses on the market for much longer than a typical short sale will allow. In this case, mortgage companies will sometimes agree to something call a deed in lieu of foreclosure. In a deed in lieu of foreclosure, you sign the deed to your home over to the mortgage company and they waive most or all of the remainder of the mortgage. There are many laws governing deeds in lieu of foreclosure, and thus this can be a length process involving mountains of paperwork. However, this can save you from a public and lengthy foreclosure process that will drain you both emotionally and financially.
When you fall behind on your mortgage payments, it can seem as if your future is completely hopeless. However, there are several options available to you that can allow you to stop foreclosure proceedings and possibly even save your family’s home.