(DailyAnswer.org) – Many of us think of owning a home as the American dream. Without financing through a mortgage, very few Americans could realize the accomplishment of owning their house or condo. Additionally, many special mortgage programs for Veterans, low-income families, and first-time home buyers make owning a home even more attainable.
Yet, individual circumstances such as job loss, national finances like the subprime crisis of 2007 to 2010, or the COVID-19 Pandemic that began in 2020 significantly increase the mortgage delinquency rate and increase the risk of homeowners defaulting on their mortgages and losing their homes.
If you’re struggling to keep your mortgage payments current, read on to learn the steps to take to save your home.
Importance of Keeping Current with Mortgage Payments
For most conventional mortgages, the bank or lending company will only accept the full payment due. If an individual’s financial problems continue, it’s understandable how a homeowner may fall 90 days behind on their mortgage, making them officially delinquent.
Once delinquent on your mortgage, it stays on your credit rating for seven years. A damaged credit rating could impact your buying power for future large purchases such as a car, college tuition, or another home.
A poor credit rating may also make it difficult to rent a property. Many rental companies make qualifying for leasing a property as difficult as obtaining a mortgage.
Ways to Catch Up on Your Mortgage Payments
The system works best for the homeowner and the lender when mortgage holders avoid foreclosure and stay in their homes. Ways to prevent defaulting on a mortgage include:
- Refinance Your Mortgage- Usually, refinancing a mortgage requires a credit score of 620 or better and a debt-to-credit ratio of less than 43%.
- Apply for Mortgage Forbearance- Ask a loan officer about temporarily delaying or reducing your payments. Options may exist for individual situations or, as in the case of the COVID-19 pandemic program, give homeowners relief with programs addressing the financial problems the virus caused.
- Negotiate a Loan Modification- Homeowners who experience financial hardship may qualify for an adjustment to their mortgage, such as a reduced interest rate.
- Reduce Your Monthly Housing Payment- Consider reducing your mortgage payment by lowering your insurance costs, researching tax-abatement laws, or removing the PMI if your equity allows it.
- Set Up a Repayment Plan- Check with your lender to see if they’ll work with you to reconstruct your payment plan.
Additional Options to Reduce Payments or Avoid Foreclosure
For those individuals with more complicated situations, there are a few more options to consider if you want to keep your mortgage from default.
- Talk to your lender about a government-based relief program to refinance your mortgage. These programs change frequently but typically come with less stringent requirements concerning credit score and debt ratio. A few examples of government-backed loans include Veteran Administration (VA), Federal Housing Authority (FHA), and United States Department.
- Consider switching your refinanced mortgage from a conventional to an adjusted rate mortgage or ARM, or if it’s already on an ARM, it may make sense to convert it to a conventional one.
- Reinstate a mortgage even after the foreclosure process begins by paying off the entire amount owed in past-due payments, property taxes, and insurance.
Tips for Saving Money
Many of us continue to feel the sting of post-pandemic inflation, and sometimes our other expenses affect the funds available for our housing expenses or mortgage payment. If your situation or other responsibilities prevent you from working more hours, check out the money-saving tips below:
- Create a Budget-Knowing what to allocate for expenses does help keep spending under control.
- Take a serious look at your spending habits- Are you spending close to $100 a week going out to lunch and stopping for $5 lattes? Bringing lunch to work and treating yourself just once a week at Starbucks will dramatically cut that expense.
- Save money on groceries- Check for sales and specials. And, yes, coupons are still available both physically and virtually.
- Check with your utility companies for money-saving opportunities- These cost savings may save you money on your tax return but also could lower monthly payments.
- Double-check your subscriptions to see what you should cancel-These subscriptions may include magazines and online services.
- Explore offers to consolidate and lower interest rates on credit cards- Check for fees and the length of the offer to make sure it works for you.
Your home represents a haven for you and your family and a financial security source. If you’re struggling with your mortgage payments, speak frankly with your lender to get the situation under control.
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