Missing your mortgage payments could put your home at risk of foreclosure. Foreclosure is the legal process by which your lender can repossess your home. When foreclosure happens, homeowners are forced to move out of their property.
The foreclosure process varies from state to state, but it typically begins when a borrower misses at least one payment. When that happens, the lender sends a missed payment notice.
If the borrower proceeds to miss the next payment, the lender issues a demand letter. Although at this point, the lender may still allow the borrower to catch up on missed payments.
After 90 days of missed payments, the lender may now send a notice of default. The loan is turned over to the lender’s foreclosure department to indicate the start of the reinstatement period. At this stage, the borrower typically has another 90 days to fulfill the payments and recover the loan.
Once the reinstatement period ends, and none of the missed payments are settled, home foreclosure officially begins.
If you’re anticipating foreclosure soon, the first thing you should do is to calm down. It’s not over until your lender officially says so. Once you’ve relaxed, follow these steps to save your home.
1. Gather your loan documents
If you’re in danger of falling behind mortgage payments, start gathering all essential documents related to your home. Include your deed of trust, copies of your mortgage, and the promissory note. If possible, also include:
- monthly utility bills and receipts
- insurance information
- property tax documentation
- copies of letters you sent to your lender
2. Know your legal rights
Once your documents are ready, read and review them carefully so that you’re aware of the consequences of missed payments. Typically, your home mortgage, deed of trust, and promissory note should indicate the penalties for late payments and whether you can save your loan by fulfilling past pending balances. Check your state laws too, as some areas allow residents the right to reinstate.
3. Assess your financial information
Apart from your loan documents, your financial standing will also play a key role in helping you save your home. Gather your latest pay stubs, bank statements, federal tax returns, and proof of other sources of income, including rental properties or Social Security. Your lender will use these figures to evaluate whether you’re eligible for other options apart from foreclosure.
4. Explore alternatives
Most homeowners have the chance to apply for permanent or temporary loss mitigation to avoid foreclosure. Two standard options are:
If you can’t afford your mortgage payments right now but may do so with slightly smaller amounts moving forward, a modification might be right for you. This option offers a permanent change to your home mortgage, often in the form of reduced interest rates or longer loan terms.
Forbearance agreements and repayment plans
If you’ve missed some of your payments due to temporary financial setbacks, you might qualify for a forbearance agreement. Your lender may reduce or suspend the payments for a set period. Once the forbearance period ends, you must settle the delinquent ones in full through a repayment program.
If you’ve fallen behind on your mortgage dues, take action as soon as you can. Organize your files, learn the foreclosure process, and be aware of your options. The more proactive you are, the better your chances of retaining your home.