The prospect of foreclosure can be terrifying, and losing your home can be a painful experience. No one enters into a mortgage with the idea that they will have to surrender the home, but unforeseen changes can leave you facing foreclosure. Job loss, medical bills, divorce or other unexpected life changes can make it a challenge to make your mortgage payments. Although it's tempting to ignore such a painful scenario, the best plan of action is to face the difficulty head on.
Be up-front with your lender about your situation. Your lender wants the same thing you do: for you to keep your house and continue paying your mortgage. If your situation is temporary, explain that to the lender.
Once you begin to fall behind, late charges will be assessed on your payments. The mortgage servicer may reach out to find out if you are planning to make good on the payment. You will be given a set amount of time to pay the delinquent amount. If you cannot make the payment all at once, you can talk to your lender about paying in installments.
You may be able to do a loan modification so that your monthly bill is reduced. The mortgage servicer can lower the interest rate, lengthen the time of the amortization of the loan, or add the delinquent amount back into the loan so that you will be able to make your payment schedule.
If you know you won't be able to afford the home long-term, it may be time to consider a short sale. In a short sale, you sell the house for less than what you owe. Your lender must approve the sale of the home for the price and can advise you on whether you will owe any additional money.
Traditionally, if you fall 90 days behind in payment, your mortgage servicer will begin to initiate foreclosure proceedings. This changed in recent years, when lenders were overloaded with foreclosures and it could take many months for proceedings to begin. The process has begun to speed up in recent months but still varies depending on the area of the country. Once the servicer refers the loan to the foreclosure department, the case is referred to a local attorney or other firm to initiate foreclosure proceedings.
If you start to fall into trouble, the most important thing is to face your situation honestly. If you don't think you can make your payments in the long term, think about other strategies and pursue them with your lender. Your lender will be able to advise you on the best path for your individual circumstances.
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