When you fall behind on your mortgage payments, the prospect of losing your home to foreclosure becomes very real. Whether it's a short-term setback or you simply can no longer afford your home, the time to act is now -- the sooner you make arrangements with your lender, the better your chances of keeping your home and saving your credit.
Contact Your Lender
If you have not already contacted your lender, do so as soon as possible. Before calling, know two things: how much you can afford to pay from this point on, and whether you foresee being able to make full payments, plus the payments you've missed, in the future. Be prepared to offer a reasonable explanation as to why you have been unable to make your payments, such as unemployment, an illness or other catastrophic event in your life. Jot down notes about your situation before calling to make sure you hit all the important points.
Ask About Your Options
If your lender does not offer you forbearance or loan modification, ask about these options. Forbearance will give you reduced or suspended payments for a specific period, at the end of which you resume making regular payments, in addition to a lump sum payment or additional payments to make up the payments you missed. Loan modification changes the terms of your loan, either by reducing your interest or payment and extending the life of loan, or by reducing or forgiving part of your loan balance.
Selling Your Home
If your home is simply not affordable, even with loan modification or forbearance, selling the house may be the best way to get rid of the payment and possibly save enough to repay the lender for the payments you missed. As long as your home is worth more than what's owed against it, selling will not be a problem; if your home is worth less than what is owed, your lender will have to agree to a short sale, or a sale that nets less than the loan amount.
Contact Hope Now Alliance
If you are behind on your payments, are not sure whether to accept modified loan terms, sell your house, or find another option, call the government-organized Hope Now Alliance of credit counselors, mortgage companies, investors and other mortgage market participants. The alliance offers free advice about your situation and helps you to work with your lender, if needed.
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