Becoming a homeowner is one of the most exciting moments of any person’s life. You finally have enough financial freedom and equity to make a down payment on a home and meet your monthly mortgage payments. Unfortunately, unanticipated events can throw your budget for a loop and leave you wondering whether you'll be able to make your next payment.
These types of situations can happen to anyone, and the thought of losing your home can take a mental toll on you and your family. Luckily, when unforeseen circumstances occur and you begin to experience economic vulnerability, you have a variety of solutions at your disposal. Continue reading to discover what to do if you’re struggling to make a mortgage payment.
Evaluate Your Relationship With Your Mortgage Servicer
You'll be required to make monthly payments to the loan servicer in order to close your loan and purchase your property. The lender is usually the company from which you borrowed money, and the servicer is the company that manages your account daily. The lender sometimes undertakes both duties, but the lender will usually hire a third party the servicer.
What Happens When You Miss Payments
The repercussions can add up quickly when you don't pay your mortgage on time. The servicer or lender may add late penalties and interest to the amount you already owe. Even a single missed payment can lower your credit score.
Worse still, your mortgage servicer or lender may take steps to declare your loan to be in default. This could be the start of foreclosure proceedings, culminating in the loss of your home.
Assess Your Financial Situation
Your first step should be to thoroughly analyze your financial situation and determine whether there are areas of your budget that you can allocate back towards your monthly mortgage payment. You can make some concessions to put money back in your pocket. For example, are you spending excessive money on leisure activities such as dining out, entertainment, subscription services, and so on? If so, can you cut out these activities until you're back on track? Ensure you're exhausting all practical alternatives before coming to the conclusion that you can't make your mortgage payments.
One way you may decide to get your financial situation in order is by making certain sacrifices, such as getting a second job or holding off on saving for retirement. Keep in mind that you are giving up something valuable when you make a trade-off.
You may have to invest extra time or energy into remedying this situation, and you must measure the trade-off against other possibilities such as loan forbearance and refinancing. However, you should never sacrifice your financial future for temporary problems in the present. There are always other options available to you.
Contact Your Mortgage Servicer
You should contact your mortgage provider before you miss your first mortgage payment. The faster you act, the more options you will have. Check your monthly mortgage loan statement or loan coupon to find the best way to contact your servicer.
Most mortgage lenders have initiatives in place to help you avoid foreclosure. The bank or loan company will assess your situation and advise you on the different options available to you.
What You Should Be Prepared To Tell Them
Be ready to clarify why you believe you cannot make your mortgage payment when you contact your loan provider. Notify them of the issue and whether it is temporary or ongoing. Make sure you have information about your earnings, expenditures, and other assets on hand.
Talk to a HUD-Approved Housing Counselor
You can always speak to a housing counselor from the Department of Housing and Urban Development (HUD) to discuss your situation and check whether you're eligible for any programs or further assistance. This counselor will help you understand the loss mitigation alternatives offered by your servicer and discuss which choices may be ideal for you. Furthermore, they can assist you with budgeting, credit card bills, or other economic difficulties that may be making it difficult to pay your mortgage.
Be Careful of Potential Scams
Unfortunately, there are many awful people out there who are willing to take advantage of those who are down on their luck. Scammers may claim to help protect you from losing your house when they are really just interested in your money. When speaking to anyone who claims to be a HUD-approved home counselor, keep an eye out for the following fraud warning signs:
- They ask you to pay for assistance in advance.
- The organization claims that it will adjust the conditions of your mortgage.
- The organization promises that you will not get evicted from your house.
- They ask you to sign over the title of your property or complete other paperwork that you do not understand.
- They direct you to send your payment to a person other than your mortgage company or servicer.
- The firm offers to do a "forensic audit."
- They advise you to cease making mortgage payments.
- The firm claims to be linked with the government or uses a logo that resembles but differs from a government emblem.
Short Sell Your Home
When you know you won't be able to make your mortgage payments, you may be able to pursue a short sale. A short sale is a transaction in which you sell your home to your mortgage lender for less than what you owe. This agreement allows you to sell your property to a buyer rather than a bank to prevent foreclosure, which would harm your credit and make it challenging to acquire a new home.
To be eligible for a short sale, you must fulfill three essential criteria:
- You must be experiencing a proven financial hardship that prevents you from paying your mortgage payments.
- You must show the lender that you do not have the funds or assets to pay the balance.
- You must demonstrate that your monthly costs, including your mortgage payments, surpass your monthly income.
What To Do If You Are Experiencing Hardships
You may be unable to make your mortgage payments because you're experiencing a sudden change in your financial situation due to hardship. A hardship is any scenario beyond your control that affects your ability to pay what you owe. Financial difficulties can include job loss, divorce, excessive medical expenses, military duty, reduction in salary or work hours, and natural disasters.
Understanding what to do if you’re struggling to make a mortgage payment can help you avoid the worst-case scenario and protect your financial future. If you’re struggling financially, you can always turn to the professionals at Short Sale Cooperative for assistance in navigating the short sale process. We'll explain the differences between short sales and foreclosures, so you can see how beneficial this transaction can be for you. Feel free to reach out to us through our website or over the phone at (800) 704-6411.