Steps to Take if You're Behind on Home Payments

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Whether you’re dealing with unexpected medical bills, job loss, or declining economic conditions – unexpected events can cause your financial circumstances to change on a dime. Home payments that were once affordable can quickly overwhelm your budget. In this article, we examine critical steps you can take to ease your financial stress and get yourself back on track. 

Behind on Home Payments? Contact Your Lender

Contact your lender as soon as possible to explore your options and develop a strategy to catch up on payments or remedy your situation. While these options may vary from lender to lender, the following solutions are commonly proposed:

  1. National and local assistance funds – The US Department of Housing and Urban Development has dedicated Homeowners Assistance Funds to help struggling homeowners keep up with house payments. If you qualify, these funds are traditionally directed to the mortgage lender or servicer on your behalf to address delinquent balances.
  2. Set up a Repayment Plan – Repayment plans are an ideal option to help with short-term, temporary financial hardships. In most instances, your lender will divide the delinquent amount across a predetermined number of months. As a result, you agree to repay overdue amounts little by little, alongside your standard payment.
  3. Ask for Forbearance – A loan forbearance is a temporary suspension or reduction of your monthly mortgage payments for a set amount of time. Length, payment reduction amount and repayment terms will depend on your specific circumstances and are at the discretion of your mortgage company.
  4. Apply for a Loan Modification – With a loan modification, such as a Flex or Disaster Relief Modification, the lender agrees to adjust the terms of your loan to lower the payment, rate, loan amount or some combination of these to make the payments more affordable. Like a normal mortgage application, you will need to provide documentation, which often includes a statement outlining the cause of your hardship (divorce, health, loss of job), how long it is expected to last, and your current and future income.
  5. Short sale of your home – if you feel your hardship will be long term and you cannot keep your home you can apply for a short sale. This is only an option to homeowners who owe more than their home is worth and the lender must approve the short sale. To qualify for a future home purchase, conventional guidelines require 4 years to pass between the short sale and a new purchase. FHA requires 3 years prior to date of the new case number assignment.
  6. Ask for a Deed in Lieu of Foreclosure – this is when you voluntarily sign the deed of the home to the lender. It is rarely granted because of the legal risk where the borrower can sue the lender later.

Time is of The Essence

If you’re experiencing financial hardship, contact your lender as soon as possible to begin exploring a resolution. While the conversation can be intimidating, the earlier you begin taking constructive action to catch up on your payments, the better.

Want to talk? Get in touch with a Michigan First Mortgage expert, today.

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