When you closed on your home, you signed a whole stack of documents, which you likely just skimmed at best. However, in that stack of papers was what's known as a promissory note. Now would be a good time to dig up that note and take a closer look because it's an important document that you should have in your files.
The promissory note is the paper on which you agreed to the amount of your monthly mortgage payment, the date that payment will be due each month, and where you'll be sending that money. It also lays out any consequences that may result of you not paying on time or as agreed.
Most fixed-rate conventional mortgages use Form 3200 from Fannie Mae. You should pull this file out from your paperwork and have a look. In the promissory note, you'll find information about when your payment is due and what happens if you miss a payment.
Luckily for you, there are grace periods that come along with due dates. Most often, there is a 15-day grace period to be exact. This means, if your mortgage is due on the first but you don't pay until the third, you're alright. You paid within the grace period and there's "no harm done" so to speak. In other words, it's not going to report as a late payment on your credit report. It's considered "overdue" rather than late.
However, if you do not pay within that grace period, your payment will end up being "late" and you will incur late fees that you'll have to pay in addition to the mortgage payment that you missed. This will also be put on your credit report as a late payment, which can lower your credit score and hurt your reputation as a borrower.
15 days late: There is a 15-day grace period in which you can pay your mortgage payment, generally without incurring any late fees or harming your credit report.
30 days late: If your payment becomes 30 days late or more, you will incur a late fee, generally a % of the missed payment that has been pre-set by your lender. The missed payment will be reported and your score could drop 50 to 100 points.
45 days late: Not only will the above have happened, at 45 days late, the lender will appoint someone to your case to inform you about your payment options.
60 days late: You’ll be given a second late fee and you can expect multiple calls from your lender regarding the missed payment(s).
90 days late: Your lender may inform you that foreclosure proceedings may begin if you do not catch up on your payments.
- 120 days late: Your lender may begin foreclosure proceedings, but this process and timeline varies from one state to the next.
When you miss a mortgage payment, time can feel like it’s moving very fast. Paying your mortgage should be a top priority to avoid damaging your credit report and, in the worst case, losing your home. If you have been a good borrower so far, you can sometimes get a better result if you call your lender and let them know why you’re going to be late this month. You may even get an extension on your grace period, but don’t make this a habit.
Being communicative with your lender is a smart thing to do. And, as far as financial smarts go, be sure to make paying your mortgage the top thing on your to-do list. This may mean getting a part-time job, cutting back other expenses, or even asking a relative or friend for assistance. Whatever it takes, don’t allow your missed payments to snowball.
If you have late payments on your mortgage and you ever go to apply for another loan, that’s going to instantly decrease your approval odds and likely cause you to pay a higher interest rate overall. Even worse, if you allow your home to enter into foreclosure proceedings, that could prevent you from obtaining financing for many years.
It’s important to realize that many mortgage assistance programs are available. Your state and county probably offers some in addition to federal and lender operated programs. The reality is this: Your lender does not want you to enter into foreclosure. It is a very expensive process for them and it’s also a massive headache for everyone involved.
If you find yourself struggling to pay your mortgage, assistance is available. Our mortgage experts at Horizon Lending Services are can help you figure out creative solutions to getting back on track.