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Chuck Brusven, Realtor
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Save Your Home; Save Your Credit

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Your home loan is what the experts call a “priority debt.” Do whatever you can to find the money to pay your mortgage each month. Once you start falling behind on your mortgage, it is a very steep and slippery slope into bankruptcy or foreclosure.

As a Realtor and Loan Originator, I am uniquely qualified to assist you through this difficult process.  This web page is provided for information only and may not fit your specific situation.  If you are considering filing for bankruptcy protection to save your home, contact a lawyer for legal advice.

Evaluate Your Situation

  1. Create a Budget with Income and Expenses: The place to start is with a very clear picture of your income and expenses. While it may be the last thing you want to do right now, creating a budget is essential. Also make a list of your regular monthly expenses and a reasonable estimate for variable expenses like groceries and gasoline. You are likely to need this information if you try to work out a payment arrangement with your lender or file for bankruptcy protection. You will get a better idea of whether you can afford to save your home, and you will be able to quickly evaluate any offers by your lender to get you back on track.
  2. Reduce Your Expenses: List of your debts, the interest rates you are paying and minimum payments. Finally, be sure to highlight any debts that you owe. For example, if you are behind on your credit cards, utilities, or other bills, make a note of what it will take to catch up. Enrolling in a credit counseling program may provide you with the relief you need on your credit card debts, so that you can focus on making sure the mortgage gets paid.
  3. Increase Your Income: You may have to consider taking a second job, start selling household items on eBay, taking in a renter, or finding other ways to boost your income. You may also have to let other bills slide if it means saving your home.
  4. Get the Market Value of Your Home: Contact your Realtor and ask for a complementary Comparative Market Analysis (CMA) to assess the current value and equity of your home.  This estimated home value and equity will provide more information when you evaluate your options.
  5. Check into a Mortgage Re-finance: Contact your Mortgage Originator to see if you can refinance your mortgage to receive lower monthly payments.  This is particularly true if you have received an interest rate adjustment.
  6. Review Your Credit Report: In your review, ask the credit bureau to remove or correct any information. Do NOT under any circumstances cancel credit cards or create additional credit sources that can increase your debt without professional advice. Any changes that seem obvious to you may reduce your credit rating.

Missed a payment or about to miss a payment:

If you find yourself one of the unfortunate homeowners that has or is about to miss a mortgage payment, use these steps to hopefully avoid the pain of foreclosure and losing your home.

  1. Keep in constant communication with your mortgage servicer. If you are about to miss a payment, call them immediately. Never ignore any phone calls or letters they send you.
  2. Remember to pay your mortgage payment before any unsecured credit payments. Credit card companies will let you know the moment you miss a payment, and will convince you your life will be over if you don't pay them. The reason they get so upset is that they can't take anything from you if you don't pay. The banks know they can take your house if you don't pay. Late and missed credit card payments will damage your credit, but nothing like a foreclosure.
  3. Never give up hope. There are several steps that can be taken to get you back on the right track with your mortgage lender.

How to Resolve Issues with your Lender:

  1. Reinstatement: Paying a lump sum to bring the loan current and continuing with payments as normal afterwards.
  2. Forbearance: You are allowed to delay payments for a short period of time with the understanding that you will bring the account current at an agreed upon date.
  3. Repayment Plan: The lender may allow you to add some of your missed payments to an agreed upon number of future payments, thus bringing your account current.
  4. Mortgage Modification: If you can't pay a lump sum to bring your loan current, but can now make monthly payments, your lender may work with you, possibly adding the past due amount to the principal balance.
  5. Selling your home: If you have adequate equity in your home, and are able to sell it for an amount to satisfy your mortgage balance.
  6. Short Sale: The bank may accept a lesser payoff for your mortgage if you get an offer on your home. Make sure the bank accepts the amount received from the short sale as paid in full with no recourse, otherwise they can come after you for the difference. Banks are warming up to the short sale because they stand to lose even more money if they have to foreclose on your home.
  7. Deed in Lieu of Foreclosure: The lender takes ownership of the property and forgives your debt. Much less damaging to your credit than a foreclosure.
  8. FHA/VA: FHA loans and VA loans are government backed loan programs that have special programs to help you avoid foreclosure. Contact the VA or HUD if you have one of these loans for more information.

Your mortgage lender won't automatically put you on one of these programs, you must work with them, and keep your promises to them. If you simply stop paying, you will lose your house, and any equity you may have in it. Banks are not in the real estate business, and do not want to own your home, they will work with you.