What to do when you fall behind on your mortgage payment

Falling behind on your mortgage payments is an unfortunate stressor. It has more of an occurrence in today’s economy during the pandemic. Economic uncertainty is part of fallout of the market shutdowns in the past year and can even take it’s toll on our mental health. Fortunately, you have viable options. Here we look at some of the best options you can do as a homeowner when you fall behind on your mortgage payments and need to avoid foreclosure.

Loan refinance:

Rates are amazing right now and if you can do so, take advantage of a refinance. If you have the equity in the home, you can take advantage of cashing out money to pay off debt or consolidate it. If you have a high interest rate, you may not even notice much of a change in your monthly payment. Additionally, you won’t have to take a hit on you credit like you would for a loan modification.

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Negatives: Not everyone qualifies for a refinance. In fact, a lot of people who need the reduction in rate the most, may not have the proof of income or the credit score to make it past the initial underwriting phase of a refinance. Speak with your bank to see if you qualify.

Loan modification:

Loan modification is a change to the terms of your loan. This is however very different from a loan refinance. You don’t get a new mortgage, rather it’s done directly through your lender and could impact your credit score. Here’s how a loan modification can change your terms:

  1. Interest rate reduction: Some homeowners still have that high interest rate from the early 2000s or before. Banks can easily reduce this rate to relieve heavy interest payments to make the loan more affordable.
  2. Forbearance: Lenders can set aside payments for a set period. This was very common during the early COVID days with no penalties. During this time, many companies were mostly concerned with keeping people in their home. These memorandums are starting to fizzle out soon and the old terms of forbearance will start to take in affect.
  3. Loan terms: Sometimes banks can modify the terms of the loans, like extending out the term to reduce the payment or transferring to a fixed rate instead of an adjustable rate mortgage.

Be prepared with your paperwork

Before you ask for help make sure you are in the best position to do so. If you are consider filing for bankruptcy, be prepared to show your attorney and a judge an assessment of where you stand financially. Here are a few documents you should consider having on hand:

  • information of your homeowner’s insurance
  • any escrow statements
  • You mortgage bill breakdown
  • all recorded payments you have made
  • complete breakdown of your property taxes

Sell your home

With the current market, your home has never been worth more. Housing shortage have increased home values with Michigan with an increase of 16.9% in the past year. Selling your home can be a fast process and leave you with a large amount of cash at your disposal after you mortgage is paid off. You can sell your home in two different ways: selling through a realtor or a ‘we buy houses’ company.

Realtor: selling with a realtor is traditional and it works. Realtors will assess your overall value of your home and find a listing price that will work for you. They take professional photos and stage the home to make it as attractive as possible to sellers.

Negatives: that treatment of your home comes at a cost. Realtors will typically charge a commission of 6% and the process can be lengthy. Additionally, the home will have to be in good condition, go through an inspection process and time for a buyer to get financing. This can pose a problem especially for people who need to sell their home quickly because they are falling behind on their payment. Finally, be prepared to pay some closing costs at the end.

We buy houses company: realtors are great to have but a lot of the work can be accomplished without having to hire someone. That means no sales commission, which equates to more money in your pocket. The length of time it takes for a we buy houses company to sell your home can be as little as seven days, which means fast relief if you are falling behind on your payments. No showings, no inspections and no closing costs with a quick sale can mean a greater rate of return if you have high interest debt.

Does this sound like a great option for you? Give us a call at Anderson Home Paths. We buy houses all over the metro Detroit area and have helped countless homeowners sell their home regardless of the condition. We always offer the most up to date offers with a no obligation cash offer on your home.

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