If you think you’re in danger of missing payments on your mortgage, the key is early communication with your mortgage servicer. This may or may not be the lender that originated your loan, but because your mortgage servicer is the entity that collects your monthly payments, you’ll want to talk with them directly. The earlier you can get in communication with them, the better. If you wait too long in an attempt to avoid the problem, it can make the situation worse.
Bankruptcy: A Chapter 7 bankruptcy wipes out your financial debt, including your mortgage, but you could lose your house. A Chapter 13 bankruptcy is more of a reorganization, and you can even catch up on payments as long as these are included in your plan.
Keeping your home in a Chapter 7 bankruptcy will largely depend on whether your home is exempt or nonexempt. Chapter 13 bankruptcy lets you keep your home as long as you make payments in accordance with your plan. If you do get to keep your home, make sure your payments stay current.
Forbearance Agreement: Something recently happened that stopped you from making your payments; Lost your job, got sick, went through a divorce, or something else that would impact your financial situation. Your lender may be willing to enter into a forbearance agreement. This agreement typically means the lender is giving you permission to make lower payments (or even no payments) for a period of time.
Loan Modification: Something significant in your life occurred that is stopping you from being able to make your payments. Before you miss a payment, it may be worth reaching out to your lender to see if they offer or would consider loan modification.
Reinstate your loan: If you are able to pay back the payments that you missed, along with the interest and late fees that you accumulated, then your lender may stop the foreclosure proceedings and allow you to continue making normal monthly mortgage payments.
Refinance: It's theoretically possible to refinance your mortgage to avoid foreclosure by getting into a more affordable payment, but some lenders want you to do so before you enter foreclosure. For the best chance of approval, do so before you’ve missed any payments. HUD permits streamline refinancing of mortgages that are no more than two months delinquent at the time of refinance. You may still have options within the different types of refinance options to work things out and stay in your home.
Repayment plan: allows you to slowly pay back the payments you missed while simultaneously continuing to make your normal mortgage payments. This allows you to slowly pay off the missed payments instead of having to pay it upfront. Though lenders may be more hesitant to do this, you can try and come to an agreement on a monthly payment on top of your mortgage that they will accept.
Sell your house: It is a difficult thing to think about, but sometimes, the best option is to sell your home. If you would make money, or even break even, if you sell your house, it’s a really good option to consider. Perhaps you could even purchase a house that is more in your price range, or even rent a house while you get back on top of your finances. Either way, selling your home allows you to not have to go through foreclosure, something that can drastically change your credit and reputation.
Short Sale: Selling your home means selling your home for less than what you currently owe on the house. Because a lot of houses that go to auction aren’t sold for their appraised price, some banks and lenders will agree to a short sell of your home.
Deed in Lieu of Foreclosure: Your lender may agree to a deed in lieu of foreclosure. All this means is that you would hand over the deed of your property to the lender, canceling any debt you may owe them. The lender would then own your property in Michigan, and you would have to vacate the home. Again, this allows you to walk away without too much damage.
During the redemption period, the homeowner(s) can continue to live in the property and are not required to make any mortgage payments. If the homeowner moves out and the property has been declared abandoned, the redemption period can be shortened to one month.
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