FAQ: I’m Behind on My House Payment—What Do I Do?

We sometimes make decisions in this life that don’t quite turn out as we’d hoped or expected them to. Quitting a predictable corporate job to start a business that never gets off the ground. Tying the knot with a longtime sweetheart only to discover that marriage is not their cup of tea. Pursuing a college degree that makes the attainment of high-paid work hard and paying off student loans even harder. Situations like these can be humbling, to say the least. More often than not, they can impact us in ways that are downright debilitating, emotionally and financially.

When you find yourself lying awake at night thinking, “On top of everything else, I’m also behind on my house payment,” feelings of failure just get compounded. You may even feel paralyzed. But the time to act is now—whether you feel like it or not—because, otherwise, things are bound to just get worse. With this particular burden, you still have options. We’ll walk you through three of them so that you can actually begin the process of moving out from under a loan you can no longer pay.

“I’m Behind on My House Payment” Is Not the End

Though it may be hard to see now, when a worst-case scenario becomes a real-life experience, it is an opportunity to begin again. We tend to get stuck when we try to recover alone, whether it’s from a business that went bust or an adjustable-rate mortgage (ARM) that got too big to pay. Help is available, though—especially when it comes to your home. As long as you act while your house is still an asset, you have the potential to get ahead of the debt.

Here’s what you can do:

Negotiate with Your Bank

When a situation arises—like a job loss, medical issue, or divorce—that threatens your ability to stay on top of your bills, that is the best time to contact your bank. They will be more open to offering solutions to keep you from falling behind on your mortgage and you’ll be in a better position to take advantage of those options in a timely fashion. If you’ve already missed a payment or even several, the chance to negotiate with your lender isn’t necessarily lost, however.

In fact, as hard as it may be to pick up the phone even after receiving a Notice of Default (NOD), you might find your bank is still willing to work with you. It’s certainly in your best interest to find out. They may be able to provide you with one of the following:

• • Forbearance. A forbearance suspends your payments for a fixed amount of time. Interest on your loan will continue to accrue, but you won’t be considered delinquent by not making a payment. This can buy you some time to get other things in order—like finding a new job—and can save your credit since your report will still read that your payments are current.
  • Loan modification. A loan modification changes the terms of your current loan so that your payments become more manageable. The length of the loan may get extended, the interest rate lowered, and the principal reduced (especially if the home’s current value is less than what you originally borrowed). Just one of these changes can significantly reduce your monthly payments and get you back on track toward paying on time.
  • Refinance. A refinance gives you a brand-new loan with much better terms, such as a longer payback period and a lower interest rate. If one of the reasons you’ve fallen behind is that your ARM has started to go up, you may be able to refinance with a fixed-rate loan and lock in a payment that works with your budget.

When a worst-case scenario becomes a real-life experience, it is an opportunity to begin again.

Short Sell Your House with a Real Estate Agent

If, however, the time for negotiating with your bank has passed because you’re behind six months or more on making your payments, your best option could be to short sell your home. Though foreclosure laws and timelines vary by state, by now you’ve probably received official notice from your bank that they intend to foreclose. And short selling a house vs foreclosure is always going to be a better option. At this point, to avoid foreclosure, it may be your only one.

The short sale process for sellers is a complicated one, however, and should not be ventured into without the help of an experienced real estate agent. Not every lender will agree to be “shorted” on the loan by a buyer eager to pay less for a house than what is still owed, either. But, because some banks and credit unions would rather have some money over none at all, they do sometimes approve the sale of a house at a discounted price so that they can get the growing debt off of their books. It helps you, too:

• You will get more time in your home—and, thus, more time to prepare to leave it—since it can take a while to find the right buyer and because the bank has to approve the sale. In some states, like California, this can equal three to six more months in the house.
• You avoid the embarrassment of being forced out of your home.
• Your credit score won’t be hit nearly as hard as it would be if the bank foreclosed.
• Your mortgage holder may give you relocation assistance to help with your move or allow the buyer to provide it as a part of the sale.

You will want to start this process sooner rather than later because the longer you wait, the less sway you’ll have with your bank. Additionally, there is never a guarantee that your lender will even agree to the sale. It’s better to find out now so you can figure out what to do next.

Because some banks and credit unions would rather have some money over none at all, they do sometimes approve the sale of a house at a discounted price.

Sell Direct for All Cash to a Real Estate Investor

Compared to negotiating with your bank or short-selling your home, selling your house direct to a real estate investor may be your least-stressful option. A reputable investor will pay you a fair price for your house and usually in all cash. They can often close quickly, too, which can keep you from falling behind on your payments (or falling further behind, as the case may be) and prevent a foreclosure from becoming a part of your record. Act fast enough—while the home is still an asset—and you may even profit nicely from the sale.

Additionally, real estate investors who pay all cash typically prefer buying homes that need some work. So, your chances of selling a house with termite damage, foundation issues, or mold are better with an investor than with most other buyers. That, in and of itself, can relieve a lot of stress. You may even be able to simply point to what you do want in the house, have the buyer help you move those items, and leave the rest behind. Find that kind of buyer and you may find that bringing your financial troubles to an end is actually an easy thing to do.

Act fast enough—while the home is still an asset—and you may even profit nicely from the sale.

The Easiest Track for Getting Out of Mortgage Debt

Having these options laid out for you doesn’t necessarily mean the best choice for you is any more clear. You may even be thinking, “I’m behind on my house payment and still feel confused.” Or you may simply fear that you’ll take the wrong step. At Sell Your House Direct, we understand this dilemma. It’s one that almost all of our clients have faced. That’s why, in addition to making a direct all-cash offer on their home, we first give advice based on their specific case.

If short-selling their house will net them more cash and help them avoid the sting of foreclosure, we say so. We provide referrals to real estate agents who are short-sale specialists, too. But, if selling to a real estate investor who can close in seven days or less (like SYHD can) will lift their burden faster, we suggest that as well. We even find the best buyer if it turns out we can’t make the highest offer. And we break everything down and provide our analysis in writing, so that all of our clients see their best direction more clearly—and that their situation doesn’t have to be hopeless. We hope you’ll give us the opportunity to help you unburden yourself, too.