If financial hardships made paying your mortgage on time impossible, don’t lose hope. You may be able to work something out with your mortgage lender before the foreclosure process begins – or even once the foreclosure wheels gain traction.
Whether you hold an FHA-insured mortgage loan and are feeling the hot breath of that moratorium deadline on the back of your neck, or you’ve fallen behind on another type of mortgage, don’t deadbolt the door on foreclosure alternatives just yet.
Learn the steps you can take to prevent foreclosure and losing your home.
1. Know your state’s foreclosure process timeline
The entire foreclosure process can take anywhere from two to twelve months, according to real estate resource HouseLogic.com. Foreclosure laws vary by state, but most lenders don’t typically start the foreclosure process until you miss at least two or three payments.
In some states, lenders aren’t allowed to initiate the foreclosure process until you’re at least 120 days delinquent on payments. FHA loans can’t be placed in foreclosure until you’ve missed at least three payments. However, non-government-backed loans can be put in foreclosure as soon as the loan is in default – meaning more than 30 days late.
2. Review your mortgage documents
Reading the fine print and legalese of mortgage loan documents is no fun, but if foreclosure is looming, you need to know the lender’s timeline for notices, initiating foreclosure, and foreclosure sales.
Also, check whether there is a specified period for curing the default by paying the full amount of the unpaid debt to prevent or reverse foreclosure.
3. Don’t ignore calls and letters
When you fall behind more than 30 days on mortgage payments, your lender will likely start calling you to find out why you haven’t made payments. Even if you think there is no way you can catch up, it’s important that you get in touch with the lender to discuss your options.
Be prepared to explain why you’re unable to make payment and whether the situation is temporary or permanent. Also be ready to provide details about your income, expenses and other assets.
“Talk to your lender and explain your situation and what you are trying to do to resolve it,” advises the U.S. Department of Housing and Urban Development (HUD). “At this time, you still may be able to make one payment to prevent yourself from falling three months behind.”
4. Seek free foreclosure avoidance counseling
You may be able to prevent foreclosure with free HUD-approved foreclosure counseling by nonprofit housing counseling agencies, according to HUD.
You could be eligible for a Making Home Affordable loan modification or refinance that could reduce your monthly payments, according to HUD. Search by state for participating nonprofit housing counseling agencies on HUD’s Foreclosure Avoidance Counseling page to get started.
Find out: Should I Refinance My Mortgage?
5. Partial claim loan
With a “partial claim,” borrowers with FHA-insured loans may be able to receive a second loan for the amount necessary to bring the delinquent loan current, according to HUD. The interest-free loan doesn’t have to be repaid until you pay off your first mortgage or sell your home.
For more information on obtaining a partial claim loan, contact HUD’s National Servicing Center at 877-622-8525.
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Article last modified on March 22, 2023. Published by Debt.com, LLC