Job layoffs are common during tough economic times, and losing your job usually means a drop in income, or loss of income altogether. Having a savings account for emergencies and taking advantage of unemployment compensation can help after a layoff. But rather than deplete your savings, consider talking to your mortgage lender to see if it can rework your loan and save you money.
Significance
Mortgage help after a layoff helps you remain in your home. Missing home loan payments for several months can prompt your mortgage lender to begin the foreclosure process. However, lenders feature numerous provisions to help distressed borrowers keep their property and avoid foreclosure.
Time Frame
The sooner you discuss your situation with your mortgage lender, the better. Assess your finances immediately after being laid off to see if you're able to keep up with your current payments. If not, call your lender's hardship department as soon as possible to discuss your options. Don't wait until the house is in foreclosure.
Considerations
Mortgage modifications can help after being laid off from a job. If you're eligible, your mortgage lender can reduce your mortgage payment to an affordable amount, which helps you keep the property. Modification requirements vary from lender to lender, and some loan companies consider this alternative only when borrowers are behind on their payments. Check with your lender to learn the requirements and steps involved in the process.
Benefits of Forbearance
A temporary layoff may bring only short-term financial problems, or you may find a job within a few weeks or months and solve your financial troubles. A forbearance option benefits borrowers who expect a change within the near future. They're unable to make mortgage payments now, but their income is expected improve, allowing them to continue making payments at the original rate. Rather than alter the loan terms with a modification, lenders may suspend or postpone payments for a few months.
Prevention/Solution
Unemployment isn't always a short-term problem -- you could be out of work for several months or years. Selling a home before reaching the foreclosure phase helps protect your credit rating, but finding a buyer who's willing to pay the needed price for the property can prove challenging. After reviewing your circumstances, your mortgage lender may approve a short sale and allow you to sell the home at a lower price -- less than the balance owed -- to avoid foreclosure.
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