6 Ways to Catch Up When Behind on Your Mortgage
Many Oregon homeowners are having trouble keeping current with their mortgage. According to CoreLogic, a national financial services firm, about 1 out of every 20 American homeowners are behind on mortgage payments.
When a homeowner needs help, the first step is to promptly contact the loan servicer to explain the situation. While working with a loan servicer can sometimes be difficult, there are counselors and resources out there that can help you work with your servicer, and understand all the options available.
Here are 6 ways to catch up and work with your lender when behind on your mortgage.
With forbearance, the loan payments are suspended or reduced for a set period of time, and the homeowner agrees to repay with a lump sum or installments at the end of the pause period.
This is a good solution for people facing a short-term change in income or economic hardship. It delays your payments without the loan being considered delinquent because in forbearance the record shows you are current on the mortgage. This solution does not typically require an underwriter or much extra work on the servicer’s part. However, you’ll be extending the term of the loan and paying a bit more in total interest.
Repayment - Installments or Lump Sum
This solution is temporary payment plan to cover the late payments. If you have corrected the financial problems and can temporarily handle a larger payment, it can work. The installment option requires you to make your regular payment, plus a little bit more, until the missed payments are made up. Or, you can make up the late payments in a lump sum payment, and the loan servicer will then show your account current and reinstate the loan.
Obviously, this solution requires a homeowner have the cash available for either option. And borrowing this money is likely not the best solution.
Loan Modification or Refinance
In a loan mod, the lender typically resets the loan with a longer payoff period or lower interest rate. Generally, a 90 or 120 day trial period is offered, before finalising the modification. This solution brings the loan current and offers a payment amount that’s affordable to you. You’ll typically need to document a financial hardship to qualify, and show that the financial hardship is behind you.
A refi requires underwriting and work on the part of the loan servicer. Naturally, you’ll need to qualify for the new loan, but they should have much of your paperwork on file already.
Lower Payments with Same Loan
If your payments are too high and you’ve fallen behind on the loan, there may be ways to lower the payment without involving the lender. Consider shopping for a lower insurance payment. Possibly you qualify for a tax abatement. This is especially applicable to seniors and can lower your monthly payment. Do you have enough equity to eliminate the Private Mortgage Insurance (PMI) portion of your monthly payment?
Another option is a partial PMI claim to pay off the late payments to the lender and then you agree to pay back the claim in installments at the back end. Better they pay a partial claim than a full one in foreclosure.
If the value of your home is less than the loans owed (upside down or underwater), then a principal reduction may be an option. In this scenario, the service reduces the loan amount owed, reflecting the current market value of your home and their underwriting. This may be better for an underwater homeowner than one who finds the payments unaffordable. Not all lenders will reduce the principal, and, in my experience, servicers are now usually offering trial modifications before reductions.
There are many state and local resources and organizations ready to help at no cost. Feel free to take a look and reach out to them for help in resolving your situation...the sooner the better.
Portland Housing Bureau / foreclosure prevention HERE
HUD counselors, HOPE Hotline, military, mediation, legal aid, and more HERE
Naturally, I'm always glad to be of service...call with any questions: (503) 680-9390
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