Trouble with mortgage payments may range from meeting bank obligations a few days late to missing a dozen or more mortgage payments and losing your home at a foreclosure action. This FAQ starts with issues surrounding paying your mortgage bill just a bit late and proceeds to look at more serious mortgage payment problems. Part II of this set deals with very serious mortgage arrearage. No matter how late your mortgage payments might be at this time, you will learn the most by reading both sections.
Q. I'm about to be late on a mortgage payment. I never missed a mortgage payment before and I'm worried about foreclosure. Can you help me now?
A. Start by taking a few steps back and get a view of the broader long term prospects for your personal finances and mortgage payments to see exactly where you need assistance.
Q. Where do I start to evaluate my mortgage problems?
A. Put your mortgage trouble in the proper prospective. Many people become quite nervous when they miss a mortgage payment as defined by not making their mortgage payment directly on the due date.
Q. Well, doesn't the fact that I never missed a mortgage due date before and now I will rate as a cause for alarm?
A. Yes, to the extent that if you never missed a mortgage payment before and now you will you need to look at the cause for the change and address the issues before they compound and get worse. At the same time it helps to understand the significance of the event from the banks point of view.
Q. I figure that the bank will be at my door with a truck to move me out and that will be their offer of assistance for getting behind on the mortgage, is that over reacting?
A. Yes, certainly for one missed home payment. Let's look at how to help with your mortgage in some greater detail.
Q. What detail? I'm behind on a mortgage payment and a missed mortgage payment is a missed mortgage payment. What is there to examine?
A. Mortgage arrearage falls into very distinct phases. Start with a payment that's 1-14 days late.
Q. OK, what can I expect the lender to do at 1-14 days late on the mortgage payment?
A. Probably nothing. In some cases you could get a telephone call. While people who never missed a mortgage payment get very agitated and start looking for help when they get late for the first time, banks don't even blink in most cases.
Q. But I'm upset about being behind on the mortgage, should I just ignore the problem until it gets worse?
A. No, deal with it, but don't blow it out of proportion. To start with, help yourself with the psychological issues. Often depression and debt go together hand in hand. Next, try to look into the future a bit.
Q. Should I buy a crystal ball or hire a swami?
A. You need to figure out if you had a small one month hic up or the start of a long term crisis. On one hand perhaps you encountered an unexpected auto repair bill, while it created quite a problem the car now runs great and the issue should not reoccur next month. Contrast that with losing your job where you do not know when you might find new employment. Even worse, imagine a life changing injury that prevents you from ever working again.
Q. Let's figure for now I fall into the group with a temporary problem, what should I do?
A. Pay your mortgage as soon as you can.
Q. But I missed my payment date, what does that mean?
A. If you can make the payment between 1 and 14 days late it really does not mean much. You do not want to make a habit out of such behavior or rely on this grace period, but as long as you payment gets properly recorded at the lender before the 14th day you will not pay a late fee.
Q. What happens to my credit score, when does a late payment start to give me bad credit?
A.You must miss a mortgage payment by 30 days or more for it to show up on your credit report. Even at that point you may not have met the definition of bad credit. If you started with great credit it may take more than a single 30 day late mortgage payment before you need to look into credit rebuilding. What you do with your credit card debt and other bills play into when you end up with bad credit.
Q. How do things change if I miss my mortgage payment by 15-29 days?
A. You will likely owe a late fee on top of your mortgage payment.
Q. I'm thinking I can pay half the mortgage now and that should let the bank know I'm making a good faith effort, isn't that the smart thing to do?
A. It might seem smart in an intellectual way, but in the banking world it represents a recipe for disaster. Even your lender personally might appreciate the gesture, but the computer and accounting systems at the bank act a particular way when they see money paid an amount less than a full payment. In most cases the systems take your partial payment and apply it to the loan's principal balance.
Q. As long as they are giving me credit for it why do I care how the bank accounts for my mortgage payment?
A. Let's imagine you have a $100,000 balance on your mortgage and your personal budget starts to get very tight. You decide you will pay half of your $1000 mortgage payment each month for 4 months.
Q. So at the end of 4 months I really made 2 full mortgage payments and I am behind on the mortgage by two months, right?
A. Very wrong! In most cases the bank took those payments and since they represented less than a full mortgage payment they just took it as a principal reduction. In their eyes you now have a mortgage balance or only $98,000 but you stand 4 months behind and they start a foreclosure on your house.
Q. Can't I explain things and get them to change the accounting on my payments?
A. Not in most cases, nor will they refund any of the money. This compounds things creating an even worse situation because if you had sent nothing at least you could have saved money for 2 mortgage payments, but in this case the bank took what little money you had and accounted for it in such a way that is gave you no benefit at all in the effort to stop foreclosure of your home.
Q. Not sending a mortgage payment at all when I have part of the money sounds bad, what should a person do?
A. First of all save the money, you need to learn what bills to pay when you cannot pay everyone, wasting what little money you might have in ways it provides little help to achieve your financial goals could prove a critical mistake.
Q. Should I just save my money and never make a mortgage payment?
A. No, as long as the bank continues to accept your payments you should save the money until you collected enough for a full payment, including the late charge, and send in a full mortgage payment. So for our example above I would suggest you just save you money the first month than during the second month when your balances allow for a full payment, you make one full payment, including the late fee, and send it to your lender. During the third and fourth month do the same thing. At the end you will be just where you had hoped when you started this line of questioning, two months in arrears on the mortgage, but with all of your payments properly accounted for.
Q. I'm having enough trouble with the mortgage payment right now; do I really need to pay those nasty late fees on top of it all?
A. I don't think it's worth the gamble not to. Certain banks might take your payment without the late fee, but others will leave the payment in escrow or apply it to principal if it does not represent a complete mortgage payment including the late fee.
Q. Once I miss one or two mortgage payments won't the bank begin foreclosure on my home?
A. Not in most cases, they do not want to foreclose on your house any more than you want to lose your home at an auction, that's a foreclosure myth. They will cut you more slack than that most of the time.
Q. At one or two months late do I qualify as someone who should file chapter 13 bankruptcy to save my home from foreclosure?
A. Probably not. With mortgage payments one or two months in arrears it's time for a very deep look into the future. Do you see your finances back on track? If so when?
Q. Lets imagine my personal finances returned to their status before my mortgage payment trouble or even got stronger, what should I do?
A. People with mortgage payment problems whose root financial crisis passed with only a few months' late payments can follow many paths without professional help. Sometimes I think of these like doing your own free modification but really they just represent methods to cure mortgage arrears you do not need the banks approval to accomplish, if you fall into this category read the specific article about do it yourself mortgage trouble solutions.
Q. Suppose I'm still in the middle of my financial problems and I'm not sure how everything will turn out.
A.Do your best to set things back on course. If you lost a job, find another. I know that may not be easy, but it's what you must do. Be realistic about the current job markets. You do not want to lose your home because you failed to realize that you needed to accept a lower paying job rather than not work at all, especially when in a situation where replacing your old job at your old pay will never happen because of changes in the job market or economy
Q. What about paying bills with my income lower while between jobs or because I had to accept a job paying less than my old job?
A. For a complete answer read Who to Pay When You Can't Pay Everyone, but basically you need to prioritize. Think about what you risk by not paying a bill or making a late payment. Would you rather keep your house or your credit cards? Most people would choose their home, therefore concentrate on mortgage payments rather than credit card debt.
Q. Let's imagine I did find a new job, but it pays less and while I now clearly see my future financial picture, it paints an ugly image. How should I help myself from there?
A. Learn about the various ways to solve mortgage problems and understand how things work so you can help stop mortgage foreclosure. Remember that you may cure mortgage payment issues in several ways. While getting a professional to negotiate a mortgage modification may lower your payment, and that may work best for many people facing mortgage arrears, others need to concentrate on a credit card debt settlement or modification of a car loan to gain the most savings. Make sure you evaluate your own personal budget to know where opportunities exist to make significant changes.
Q. How to I proceed if my financial future looks certain, but no longer earn the income to make my monthly mortgage payment?
A. In most cases you would explore a mortgage modification, where the bank would lower your monthly payment. As I just said above, people who could make their mortgage payment if it they found a solution for credit card debt might look into lowering expenses that way. Many consumers start a consultation desperate for help to save their home and thinking only about how to adjust their mortgage payment. Upon further examination their mortgage payment might end up $100 per month lower with the best loan modification in the world, but their budget includes $700 in credit card bills or $1000 in car loan payments. Most people could help their situation by establishing a better personal budget.
Q. What if I still do not make enough money to pay my mortgage payment each month even in a situation where the bank granted me a mortgage modification and I took into account my other debt and fixed my budget?
A. For some people a mortgage modification, chapter 13 bankruptcy or even a chapter 7 bankruptcydoes not clear up debt and lower mortgage payments in such a way that they might remain in their home. Not every case results in people being able to keep their house.
Q. What if I stand as someone who must move?
A. First I would say before you think that make sure you thoroughly explored all options. At a minimum make sure you spoke to several professionals about mortgage modification and make multiple attempts to find a bankruptcy lawyer that could help you.
Q. Why look for more than one of each type of mortgage help?
A. You might find yourself in a tough or unique situation. Sometimes people do not realize that their personal case could result in successfully saving their home, but only by someone with particularly good skills. Such people risk speaking to a single provider that, if not quite as experienced, tells them they need to look only of losing the house to foreclosure or bankruptcy. Trying to avoid foreclosure should represent something you take very seriously. If a local general doctor told you that your son had some disease that he had never seen before and he would likely die would you just let him die or take him to a specialist even if it meant searching one out and traveling to find him? Treat saving your home the same way. If you end up with your best solution as a short sale or deed in lieu of foreclosure where you give up the home, you want to be able to look back in 5 years and feel you explored every option and came to that decision with no regrets.
Q. You mentioned the bank not accepting a home mortgage payment. Can a bank actually refuse to take a mortgage payment if you offer them the full monthly payment including the late fee?
A. Yes, this usually happens after four past due mortgage payments, in part II you will learn what to do to keep your home when you get three or four months in arrears on your mortgage.
Nothing contained herein should be construed to constitute advice for your personal circumstances. This is intended as a peripheral exposure to the various options available, but by no means is this a comprehensive or exhaustive analysis of the bankruptcy laws or their alternatives. Whether or not you should file a Chapter 7, Chapter 13 or any bankruptcy, will vary depending on your personal circumstances and should only be undertaken after careful consideration, analysis and after consultation with an attorney experienced with such matters. These pages may contain information and rules peculiar to the Commonwealth of Massachusetts.
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The most recent update of this page occurred February, 01 2011.