What To Do If You Can't Pay Your Mortgage as a Homeowner?

If you find yourself unable to meet your regular monthly mortgage payments, there are several mortgage assistance measures, including forbearance and loan modification, that can help prevent foreclosure. For those at risk of missing one or more payments or who are already behind on their mortgage, you may consider selling your home to a direct cash buyer.

If you are in Southern Oregon, you may want to consider contacting Mast Property Development to guide you through selling your foreclosed home. Don't worry if you are not thinking to sell - there are other ways to avoid foreclosure on your home as well.

1. Contact Your Lender Immediately

It's advisable to reach out to your mortgage lender as soon as you foresee difficulties in making upcoming payments, rather than waiting until a payment has been missed. Proactively seeking mortgage assistance can open up a broader range of options for you. Early communication is key to accessing tailored advice for your situation. When preparing to contact your lender, ensure you have the following information at hand:

• A detailed estimate of your current and, if expected to change, future income.

• An overview of your present financial obligations and expenses.

• The most recent statement of your mortgage account.

• Any relevant documentation or evidence illustrating the cause of your financial distress, often referred to as "proof of hardship."

2. Understanding Mortgage Forbearance

Mortgage forbearance helps homeowners facing temporary financial difficulties by reducing or suspending payments for up to 12 months to regain stability. Foreclosure is halted during this period, with the expectation that homeowners will later repay the missed amounts either in a lump sum or through a repayment plan. Interest will accrue despite paused payments, and while lenders often don't report adjusted payments to credit bureaus, preserving credit scores, there's a possibility that some might report the forbearance, potentially impacting credit, but less so than missed payments or foreclosure.

Upon concluding the forbearance term, homeowners are required to address the repayment of any suspended amounts according to an agreement with their lender. For those looking to refinance or acquire a new mortgage afterward, lenders will generally review your repayment history post-forbearance, expecting to see evidence of settled forbearance amounts and consistent, on-time payments for a year.

It is essential to note that before entering into a forbearance agreement, thoroughly review and understand the repayment obligations. Repayment strategies often include increased monthly payments for a period or a one-time "balloon payment" at the end of forbearance. If the proposed repayment terms are not feasible, it may be worthwhile to negotiate alternative arrangements or explore loan modification options to better align with your financial capacity.

3. Explore Refinancing Options

Refinancing involves replacing your existing mortgage with a new loan that has a lower monthly payment, potentially making your housing costs more manageable. This strategy is particularly effective if you have good credit, substantial equity in your home (at least 20% to bypass the need for mortgage insurance on the new loan), and the ability to secure a significantly lower interest rate compared to your current mortgage.

The process of refinancing can extend over several weeks or months and typically involves paying origination fees for the new loan, which can be paid upfront or rolled into the loan balance. However, if you have missed payments on your current mortgage, this may impact your eligibility and the likelihood of securing approval for refinancing.

4. Considering Renting Out Your Home

If relocating to a more affordable living situation, such as staying with friends or family, is feasible for you, turning your property into a rental could be a strategic move. This is especially viable if the rental income can adequately cover your mortgage payments. However, before transitioning into the role of a landlord, there are several critical considerations:

• Landlords often face higher property insurance premiums.

• Responsibility for the maintenance and repair of the home remains yours.

• Any missed mortgage payments during the transition to a rental must be addressed and re-paid.

• Should you face foreclosure after your home has been rented out, your tenants might have legal grounds to pursue action against you.

5. Loan Modification

A loan modification is an adjustment to the terms of your existing mortgage, agreed upon with your lender, to avoid foreclosure without the need to refinance. Changes can include a reduced interest rate, an extended loan term, a shift in loan type, or incorporating overdue payments into your outstanding loan balance. The primary aim is to make monthly payments more manageable and prevent foreclosure.

Although a loan modification may impact your credit score, the effect is generally less detrimental than foreclosure. You can apply for a modification directly or as a follow-up to forbearance. If not preceded by forbearance, proof of financial hardship is necessary. This option is typically aimed at homeowners who are on the brink of default or already behind on payments.

Lenders often require a trial payment period, usually three months, to ensure the new payment amount is manageable. Post-modification, for eligibility for future loans or refinancing, proof of consistent payment under the new terms is required. For temporary adjustments, evidence of repaid deferred amounts and resumption of regular terms is needed. For permanent modifications, lenders may require 12 to 24 months of timely payments.

6. Consider Selling Your Home

Selling your home could be a wise financial decision, especially if its market value exceeds the amount you owe on your mortgage. You can also contact a home buying firm like Mast Property Development that buys foreclosed homes along the Southern Coast of Oregon. We are direct buyers, and eliminate any need for you to pay commissions - meaning more cash for you!

It's also important to note that missing mortgage payments during the sales process, even if it's expedited, can severely damage your credit score and reports. To mitigate this risk, it's advisable to maintain regular mortgage payments while attempting to sell your property.

7. Opt for a Short Sale

A short sale occurs when your lender permits you to sell your home for less than the remaining balance of your mortgage and agrees to accept the proceeds as full settlement of your debt. While a short sale will negatively impact your credit report and likely reduce your credit scores, it typically has a less severe effect compared to foreclosure.

Opting for a short sale can also prevent the financial burden of a deficiency judgment, which is a court order requiring you to pay the difference between the sale price and the mortgage amount in some jurisdictions. However, be aware that in certain states, any debt forgiven through a short sale may be considered taxable income.

Key Takeaways: How To Avoid Mortgage Paying Troubles?

Facing financial difficulties, including the struggle to pay your mortgage, presents challenging choices. Some options might necessitate relinquishing your home, others could affect your credit score, and certain strategies might lead to both outcomes.

In times of financial crisis, the aim is to mitigate damage and select the path that best enables a fresh start. Acting decisively and seeking proactive solutions are key steps towards avoiding foreclosure or bankruptcy, paving the way for recovery.