Many people, especially if the home is the primary residence, will want to try to stay in the home. There are some things that you can do accomplish this. Remember that all of these options are going to have to be worked out with your bank. Many if not all mortgage banks will require that you do several things prior to beginning any of these solutions.
Most banks will require a Hardship Letter. This is basically a letter telling the bank why you have fallen behind on your Mortgage Payments. Be specific, for example: if it was due to a prolonged illness, tell them how long you were off work, be sure to include any and all of the out of pocket expenses that you incurred.
The next thing that the bank is going to want you to do is to itemize your expenses and prove your income. You are basically going to be figuring out a budget. The bank may ask you to provide current pay stubs and tax returns. You’re going to want to show all of the expenses that you have including utilities.
Once the Bank has the information that it wants, its representatives can work with you on solutions to try to stay in your home. They may ask for more than I have mentioned, they may ask for less, it all depends on the bank’s in house requirements.
It is imperative that you maintain contact with your bank during this process. Keep detailed notes of who you talked to, which department they are in, the day and time that you talked with them and what was discussed. Now here are some of the solutions that you may be able to work out.
Repayment: this is the most straightforward solution. You agree to catch up your back payments and continue with your normal mortgage payment.
Forebearance: this is another option in that you agree with the bank to make a modified payment for several months to catch up the mortgage. Then once your financial situation has stabilized, you would make your regular mortgage payment.
Modification of the loan:, this can be several things, a reduction of the interest rate, extending the payments out over time. Going from a 30 to a 40 year mortgage is an example of extending the time term of the loan. Re-amortizing the loan, this is basically rewriting the loan and adding in the late and back payments to the principle amount.
Partial or Advanced Claim: This is a second loan with no or very low interest that is repaid after the first mortgage is paid.
Refinance: This is an option that the lender may offer if there is equity in the home, and the bank may add an additional borrower to the loan.
None of these options guarantee that you will be able to stay in your home. Your financial situation may just not support the bank interests in keeping you in the home. The solutions for not staying in the home are another blog topic.