I've missed a mortgage payment. What are my options?
It's a common misunderstanding that if you miss one mortgage payment, the bank will foreclose within days and come to reposess your home in the middle of the night.
Let's clear this up right now: this does not happen. No one is coming for you, in the middle of the night, to haul your belongings out of the home. And if the payments continue to be missed, it will take a lot longer than days for any action to be taken.
Let's talk about what missing a payment does, and some options you have, should you be in this position.
Missing mortgage payments starts a long foreclosure process with your lender. In Phoenix, it takes an average of about 6-7 months to actually have the lender set the foreclosure date. Did you notice how I said "mortgage payments", as in plural? Missing one payment will not trigger foreclosure. Typically, you've got you miss at least three before the lender starts the whole foreclosure process.
So, what are your options, in the meantime?
1. Repay the missed payment, including all late fees and penalties, and become current with your lender. This ends the foreclosure process, and you are in good standing with your lender, once again.
2. Apply for a loan modification. Yes, sometimes these actually do work. BUT keep in mind, your lender is not forgiving or erasing any debt. The amount your payment is being reduced monthly is being tacked on to the principle balance. The loan amount remains the same and actually increases in most cases, due to interest and penalties to be repaid.
3. Consult with an agent about short selling your home. If you have missed a payment and think you may have trouble making payments in the future, consult with a real estate agent that is a short sale specialist. You may qualify to sell your house for less than the amount you owe on the loan. Not everyone qualifies and there are circumstances that must be present. However, short sales are a way of getting out from underneath your home without reaking havoc on your credit and avoid a foreclosure going on your public record. If this is an option you'd like to explore, MAKE SURE YOU FIND AN AGENT THAT SPECIALIZES IN SHORT SALES. There are legal and tax consequences that need to be adressed that a specialist will have the resources to provice. Short sales are also a tricky process that need to be navigated by an experienced short sale agent. Hiring an agent that isn't expert in this area can result in unnecessary tax ramifications, law suits by your lender, and foreclosure. All of which can be avoided with an experienced short sale expert.
Have questions about any of these options? Want to discuss your personal options? Please contact me directly. I'm a distressed property expert and I'm here to help.