What To Do When the Mortgage Struggle Is Real - American Credit Foundation

What To Do When the Mortgage Struggle Is Real

What To Do When the Mortgage Struggle Is Real

Let’s face it, life can throw some real curve balls. That perfect house you bought a few years ago may have started out looking like a dream come true, but now it’s turned into a debt nightmare. If paying the mortgage is keeping you up at night, rest assured that help is available. You don’t have to be saddled forever with a payment you can’t make. You do have options, but do not wait until it’s too late.

You might be nervous – or might feel embarrassed to admit it – but if you are struggling to pay your mortgage, you need to call your mortgage servicer right away. Do not wait until you are behind on your payments. In fact, the sooner you ask for help, the better your options may be.

Contact Your Lender

If you aren’t sure who your mortgage servicer is, or how to contact them, that information can be found on your monthly mortgage statement, your mortgage coupon book, or your mortgage company’s website. You will need to have a couple of things handy before you make the call.

contact your lender

Find a recent copy of your mortgage statement, and be ready to discuss the following:

  • The reason(s) you are having trouble making payments. Whether you have experienced an income reduction due to job loss or injury, a major life change such as divorce or death of a spouse, unexpected expenses such as medical bills, or another hardship, be ready to give details.
  • The reason(s) you missed a payment. If you’ve already missed a payment (or two or seven), your servicer will want to know the specifics of what happened and why you were unable to make them.
  • Whether you think the situation is temporary or permanent.
  • How you would like to see things resolved. Presuming you’d like to keep the house, be prepared to suggest a repayment strategy that you would reasonably be able to make.

Once your mortgage servicer has a better understanding of your personal circumstances, they will be able to provide you with all of the options available to you. 

Discuss Your Options

If you have an Adjustable Rate Mortgage (ARM) and your payments have gone up because of a rising interest rate, ask your servicer about refinancing. Depending on current interest rates, you might be able to refinance your loan to a lower fixed rate. If you plan to stay in the house for several years, this could be a good investment.

If you already have a fixed rate mortgage, your interest rate and payments have stayed the same, but your ability to make those payments may have changed. Ask your mortgage servicer about a loan modification. If you can no longer make your house payment and loan modification is not an option, you may decide that you can no longer keep the house. There are still a number of avenues available to you that will allow you to avoid foreclosure.

  1. Sell Your House

This is the most straightforward remedy. If the market value of the house is at or above the amount you owe the bank, you can sell the house to pay off the mortgage. If you have equity in the house – meaning you can sell it for more than you owe – you may even be able to walk away from the sale with a little cash in your pocket.

  1. Short Sale

Essentially, a short sale is when the bank is willing to sell your property for less than what you owe them. It can be a fairly complicated process, but it is a way to avoid foreclosure. Two things must be true for the bank to consider a short sale: 1) You must be behind on payments; and 2) The current market value of the property must have fallen below the amount you owe.

  1. Deed in Lieu of Foreclosure

A deed in lieu of foreclosure is a document signed by both parties (you and the mortgage company) that transfers the title of the property over to them in exchange for a release of the mortgage debt. This is a drastic measure that results in you forfeiting any equity you might have in the property. It should be viewed as a last-ditch effort to sidestep foreclosure.

  1. Foreclosure 

This a legitimate remedy, but it should really be reserved as a last resort if none of the above mitigation options will work. Foreclosure occurs when you fail to repay your mortgage loan, and the incident remains on your credit reports for seven years. Lenders see this as a major red flag when considering any future loan applications – meaning that you likely won’t qualify for credit for several years afterward.

Beware of Scammers!

These keen opportunists know just how to find you and will try to take advantage of your situation. While they may initially sound helpful, they are just out to get your money and your property. 

How can you tell if the call is from a scammer? These are a few sure signs:

  • They ask for money up front.
  • They make unrealistic guarantees like promising that you will not lose your house.
  • They tell you to send payments to them, instead of the mortgage company.
  • They tell you stop making payments to your mortgage company.
  • They ask you to sign your house over to them.

Struggling to pay your mortgage is a heavy weight to bear, and facing possible foreclosure can be really scary. If your finances have slipped out of your control and you’re at a loss for what to do, know that you are not in this alone. Our knowledgeable team of advisors at American Credit Foundation is here to help you 7 days a week. We are your friendly advocate in an undoubtedly stressful situation.