What to do About Your Mortgage When You're Facing Money Problems

Unfortunately, when facing unemployment, unexpected medical expenses, funding the care of a family member, or other financial strains, you may find yourself struggling to pay the mortgages and worry about loosing your homes in foreclosure.  The good news is, you can avoid foreclosure and keep your home if you know the right steps to take.  The Federal Housing Administration, a division of the U.S. Department of Housing and Urban Development, and other government agencies, works with the mortgage industry to help you keep your home.  The following tips summarize advice from these agencies, combined with common sense strategies, to help you avoid foreclosure. 


1.      Contact your lender as soon as possible.

Don’t wait to call your lender if you are having money problems – and definitely don’t avoid calls or letters from a lender trying to reach you!  Many people avoid talking with their lenders out of fear that the lender will automatically initiate foreclosure proceedings.  However, foreclosure is NOT the first step a lender will usually take.  In fact, foreclosure is a long and expensive process for lenders and often results in a loss for them.  Lenders much prefer you to keep your home.  Also, mortgage regulations may even require lenders to work with borrowers who are facing money problems to work with borrowers to avoid foreclosure.  Temporary solutions may include reduced payment plans, forbearance, and workout packages.  For more serious money situations, ask your lender if you would be eligible for any kind of mortgage modification – such as changing from an adjustable mortgage rate to a fixed rate, extending your repayment term, or adjusting the balance owed to reflect missed payments.  Ask your lender for more information about these options.   However, the farther behind you are on payments, fewer options may be available.

2.      Talk to a housing or credit counselor.

A housing counselor, or even a credit counselor, works with families to determining what options are available for their particular situations.  This includes making financial budgets, learning about different workout packages which the borrower may be eligible, and sometimes includes help actually negotiating with the lender on the borrower’s behalf.  Many housing counselors are affiliated with national and regional HUD approved agencies.

3.       Look closely at your income and expenses.

Financial problems boil down to two basic sides of the equation  - how much is coming in, and how much is going out.  Look closely at your finances and figure out if you can improve either side of your equation.  Can you increase your income?  Perhaps you can ask for overtime at work, take on a second job, or start a side business at home.  Otherwise, look to see what you can do to reduce your spending.  What can you cut out?  Can you pack a bag lunch instead of going out to eat during the work week?  Little things might end up going a long way toward saving you the extra few hundred dollars a month that could make a big difference in your bottom line.  Taking even small steps can help protect against losing your home. 

4.      Pay the most important bills first.

When tightening your budget, pay for the necessities of life first – food, shelter and utilities.  While failing to pay credit cable bill, or other “non-necessity” bills, can seriously affect your credit score, if you don’t make your mortgage payment, you risk losing your home! 

5.      Consider selling personal property to pay off debts.


Do you have any personal property you could sell to help pay your debts?  You might be able to sell that second car, for example.  Also, take a look at smaller items sitting around in the garage that you could sell on websites like eBay?  Those 2-year old skis?  A poster collection?    You might be surprised and find the money really adds up. 


6.      Consider borrowing money.


Taking out a loan to help pay mortgage expenses isn’t right for everyone.  However, for some situations, getting a loan from a friend, family member, or a bank may be a solution, particularly if your money problems are temporary and you know you will be able to repay the loan at some specified date in the near future. 


If you are facing money problems making it difficult to pay your home mortgage, try some of the tips above.  Small changes could yield big rewards, perhaps even avoiding losing your home through foreclosure.  For more serious assistance, contact an attorney to determine what legal options may be available and to assist you with negotiating these options with your lender. 

The information on this page is meant to provide a general overview of the law. The laws in your state and/or city may deviate significantly from those described here. If you have specific questions related to your situation you should speak with a local attorney.

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