What Options Do I Have If I Am Behind On My Mortgage Payments?
Let’s First Look How It Affects Your Credit Score
When money gets tight and you are going to be forced to be late on your bills first consider what items report to your credit report each month. Your phone bill, electric bill, gas, cell phone, water and other similar bills do not report on your credit report.
A late payment for your mortgage will hurt your credit score more than a late payment for a car loan or credit card. Late mortgage payments are one of the most harmful delinquent accounts that can be found on a credit report.
Once a mortgage becomes 60, 90 and then 120 days past due, it is often very difficult to catch up the arrears. Extra interest, attorney fees and collection fees can be added to the amount. It becomes more and more difficult to obtain a refinance loan also.
On a first trust deed or mortgage, the borrower must pay a penalty if the payment is made more than fifteen days after the due date. So, not just the 60, 90 and 120 days, but also just fifteen days can harm your credit score and can eat up your budget quickly.
The Three Basic Choices
If you’re two months behind on paying your mortgage, you’re still safe. You should act soon, however. Make sure you continue to keep the lines of communication open with your current lender. They would rather work with you than have you give them back the keys to your home.
You have three choices:
- If you go one more month without paying your mortgage, your current lender will issue you a notice of default. Then, the foreclosure process will begin.
- Your lender will usually offer you the option to make up the back payments over a period of time. This is called forbearance.
- Call a professional mortgage broker. There may be a better loan product out there that will help you make timely payments in the future.
Let’s Find Some Good News
There are specific lenders called “sub-prime” lenders that have a multitude of options available that can help you straighten things out. Although the interest rates will be higher, depending on the lender and your specific situation. they will work with you.
Another great piece of information is that lenders only look at the last 12 months of mortgage history. If you can wait out the 12 months (after your negative mortgage payments) then your late payments will not affect your credit once you are back on track.
You can even refinance which may be very helpful to you at this time no matter how good or bad your credit is, no matter how far behind you are on your mortgage. The type of financing though that you may qualify for with a poor mortgage history will probably be less than favorable.
The key to all of this is the amount of equity you have in your home. The more you have the more opportunities you will be afforded. What your lender wants is the money from the home. Therefore, they are more than willing to work with you as long as they can see you are also trying to work things out.
