When you fall behind on the mortgage payment, it can feel like you’re drowning in debt. Likely, it is caused by another life issue such as job loss, divorce, or medical bills. One problem has led to another.
There are a few options that can help you to avoid foreclosure and maybe even keep your house – even if you’re seriously behind in payments.
1. Making Home Affordable (MFA):
If your mortgage qualifies, you might be able to participate in MHA. Any loans backed by Fannie Mae or Freddie Mac must be considered for MHA, and other lenders choose to participate in MFA.
With MFA, your payments and/or interest rates might be lowered – even the principal balance (if your home is worth less than you owe). If you’re unemployed, you might be able to get your payments temporarily suspended or reduced.
MFA is a government program, so be prepared to deal with lots of paperwork. It ain’t free money – you gotta work for it. There are also some restrictions, such as not being greater than 60 days past due.
2. Negotiate with your bank:
Lots of lenders routinely offer some level of assistance. You have to work hard at it, but you might be able to get your interest rate reduced, or a temporary reduction in your payment.
Most of the time, lenders will want to steer you to refinance your loan – but by the time you’re a few payments behind, you probably don’t qualify for a reduction in interest rate.
You have to work really hard to negotiate with a bank. Usually it takes lots of calls and the patience of a saint to get through the bureaucracy. Never, ever be rude. Ask for help from everyone you speak with, but don’t sound desperate. Explain your situation, offer supporting documents, and reassure the bank that you want to live in your home for the long term.
If you’re in need of a temporary fix and want to stay in your home, most banks can be forgiving. Sometimes they’ll be willing to add a few months of payments back onto the primary balance of your loan. It’s all dollars and cents to them, so remind them that you need their help to give them a lot more money in the long run. If they have to sell your house at a foreclosure auction, they’ll take a huge loss.
That sounds obvious, but for some reason bankers seem to forget it when saying no to someone in need of help. We can also help guide you through the process and take on a negotiator role for you. Call us for more information about this service. TIP: do not pay anyone up front for help with this!
3. Borrow money from a private investor or relative:
If you have a relative that might be interested in helping, chances are you’ve reached out to them. If not, here is a creative way to get past the awkwardness or pride that may be standing in the way. Offer to have them become part owner in the home in exchange for helping you get the mortgage current. This works best if your repayment issue is temporary. If there is no resolution in sight, it’s probably not worth it to them.
You would need to discuss if they will be entitled to half of your equity, or a different amount. Decide what their help and money is worth in relation to your equity. Create a promissory note (via attorney or google), and ask a title company to help you record the changes to the property.
If you’re behind in your payments and need to sell fast, we can help. In certain circumstances, we may even be able to help you stay in your home.
We work with homeowners in to find solutions to foreclosure problems. We’ll let you know how we can help.
This is usually the tool of last resort. If you’re behind on the mortgage payment or being crushed by lots of debt, bankruptcy can be a good way to negotiate with lots of lenders at once. It’s a lot of work, and it won’t help you avoid your mortgage. Different lenders will treat your circumstances in unique ways. You’d benefit from serious professional help – the best you can afford.