Selling a house when you're behind on mortgage payments

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Selling a house when you're behind on mortgage payments

Financial instability is an issue many people encounter during their lifetimes. What can you do when circumstances push you to the wall? Selling your house may be one of the best options when you're behind on mortgage payments. Are there any alternatives to your situation? If you are keen and proactive, you can solve your problem and manage to maintain your credit score while avoiding foreclosure.

So whether you want to sell your house or maintain it before a pending foreclosure, you need to take immediate action before things get worse. Depending on your mortgage payments, it will be more challenging if you wait too long.

Here are various options to consider when behind on payments:

Modifying your loan

If you want to keep your house to avoid foreclosure, you should consider contacting your mortgage lender to check whether they can modify your loan. While the Consumer Financial Protection Bureau (CFPB) protects you from the risk of foreclosure, it’s necessary to act quickly to modify your loan if you have a stable income. This will help you to pay your mortgage at lower interest rates. Contacting your bank or mortgage servicer to check whether they can modify your loan is necessary. However, you must provide proof of hardship for your bank to know why you cannot pay your mortgage. If they approve your loan modification, you will have a 90 +-day trial period, allowing you to make three payments at lower interest rates. Once they notice that you can make the payment, they may finalize your modification.

Sell your home

If you can't qualify for a loan modification or want to sell your house, you have a few options:

  • Listing with Realtor: You can sell it on the market with a Realtor who understands the pre-foreclosure process. (Make sure the Realtor is experienced in selling pre-foreclosures.  Few Realtors know how to deal with this.)  This will require listings, photos, showings, appraisals, inspections, cleaning, lenders, possible repairs, and of course commissions and closing fees. 
  • Selling to a cash buyer real estate investor: This could possibly be a better option for your situation because it allows you to skip all the fees and hassles of listing your property for sale.  Finding an honest, reputable, savvy buyer can make the process very simple since many house investors do not require dealing with lenders, appraisals, repairs or cleaning.  An added bonus is many investors know how to deal with property in pre-foreclosure.

Note that selling your house when behind on mortgage payments helps you avoid foreclosure, and if the house's value is less than what you owe, an option is to short the mortgage, commonly known as a short sale.

Short sale

A short sale comes in handy when you owe your mortgage lender more than your current house worth. In other words, a short sale is when your mortgage lender accepts a lower sales price on your home than what you owe. This is the best way of getting out of your mortgages. You won't be required to pay off the outstanding balance because you can settle or re-negotiate all your debts.

However, before you decide on whether you want a short sale, you should consider the following things:

  • Not all mortgages will be willing to offset your loan balance. Therefore, you must ensure solid commitment with the lender before making a short sale. Otherwise, you will sell your home but still, have a remaining balance.
  • Attempting a short sale will hurt your credit score. So it's necessary to have other housing options before the deal. Otherwise, your credit scores may fall lower, making it difficult to obtain financing for another house or rent.

Fortunately, sometimes, considering a short sale can help you qualify for Government's cash incentives to help you during relocation. But first, you must meet the Home Affordable Foreclosure Alternatives (HAFA). If you meet all the requirements, you may qualify for Government incentives.

Sell to a Real Estate Investor (Even with no equity)

In many instances, selling your home to real estate investors is an excellent option because real estate investors often pay cash within a few weeks. This saves you from the stress of an impending foreclosure. The good thing is that you don't have to prepare your house for sale, find a realtor, and experience the stress of selling a home if you choose this option. You aim to work with a real estate investor who offers reasonable prices and quickly helps you get a break from your mortgage payments. 

Owe more than your house is worth?  Many times, an experienced investor can make up your back payments, stop the foreclosure and take over your mortgage.  This saves your credit and the impending doom of foreclosure all while adding some cash to your pocket so you can move on with your life.


The foreclosure process could take up to several months, so there's enough time for you to take action when you're behind on payments. The best thing to do is to take immediate, appropriate action. Don’t wait!  It will not resolve itself. While many homeowners facing foreclosure often accept the situation and lose their homes, you can do something to avoid being like them. Fortunately, there are options. Contact us at 405-754-2444 and we will do our best to point you in the right direction.

Comments (4)

Dan Hopper
Dan Hopper - Gold Way RE - Westminster, CO
Colorado Broker / Referral Services

This information if very important and possibly good timing,  ... with the era of pandemics / covid, and the forbearance ending on many homes, pre-foreclosures and short pay-offs may be on the horizon, again.

Jul 13, 2022 11:59 AM
Dave Halpern
Dave Halpern Real Estate Agent, Inc., Louisville, KY (502) 664-7827 - Louisville, KY
Louisville Short Sale Expert

Foreclosures are brewing on the horizon. Gas prices, inflation, and rising interest rates are putting us on the track of missed mortgage payments.

Jul 14, 2022 09:11 AM
Jan Green - Scottsdale, AZ
Value Added Service, 602-620-2699 - Scottsdale, AZ
HomeSmart Elite Group, REALTOR®, EcoBroker, GREEN

The caveat is not every lender will allow someone to take over a mortgage. If they find out they could call the mortgage.  Great information but a homeowner needs to consult a professional in their city and state to be sure of laws and guidelines.  

Jul 14, 2022 02:51 PM
Richard Weeks
Dallas, TX
REALTOR®, Broker

Great information, thanks for sharing.  I hope you have a great day.

Jul 15, 2022 04:13 AM