In hard financial times, making the mortgage payment can be a challenge. When financial difficulties occur, cutting off communication with your lender is the worst thing you can do if you want to avoid home mortgage default. In fact, swallowing your pride to make a call to them may be what saves your home from foreclosure.
Before you miss a payment
A foreclosure stays on your credit report for years, making home mortgage default among the least desirable things to do. Understanding your finances is critical before you contact your lender. You must know whether your delinquency is because of a financial emergency or if it’s because of a series of bad choices.
If you’re in the midst of an emergency, let your lender know exactly what’s occurring. An extended hospital stay after a car accident, for example, is an extraordinary circumstance that is unlikely to continue keeping you from making your mortgage payments. On the other hand, a job loss or cut in income can have far-reaching effects on your ability to repay your loan.
When you’re on the verge of home mortgage default because of your own choices, it’s time to make difficult decisions about your money. The first order of business is to create a new budget and figure out what you can actually afford to pay each month. It’s possible that your mortgage company can refinance your loan into one with a more affordable payment.
After you miss a payment
It’s true that you have fewer options after you miss a mortgage payment because your lender may waste no time reporting your delinquency to the credit bureaus. This can make refinancing more difficult, if not impossible. Regardless, don’t delay in opening the lines of communication with your lender. Some lenders will start the foreclosure process after as little as three consecutive missed payments.
Even if you exhaust your options with the lender and they do put your loan into home mortgage default status, hope is not lost. You still have time to bring your loan current after the lender files the Notice of Default, typically about 90 days. If you’ve been making progress towards cutting your expenses and creating additional income, you may be able to come up with the cash you need before your home goes to auction.
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