What Happens When You Are a Few Months Late on Your Mortgage?

What Happens When You Are a Few Months Late on Your Mortgage?

You are currently a homeowner! Congrats to you. You want to build a future for yourself, to have a home that you can call your own, and to raise your family in financial security, without having rent looming over you. This plan sounds perfect and easy to achieve.

That is until something happens to put a dent in your plans. A family member falls ill. Your kitchen gets flooded and you have to go through repairs. Your car breaks down, and you need it to get to work. Or worst of all, “work” is no longer there – because you lost your job.

In these situations, you are probably in a spot where you are forced to miss a payment or two – so what happens in these circumstances?

Missing the First Payment

Say that you have been hit by a bus. Your income stream will suddenly come to a stop because you have to pay for hospitalization. If you can manage to get back on track right away, there should be no problems. An overdue payment is better than none at all.

Once you have missed a month’s payment, you are immediately sent into “default status.” In this case, you may want to try contacting your lender as soon as possible. If you are in need of an extension, you may be able to receive one without risking a penalty.

Missing Three Payments 

Things start getting troublesome if you miss three months of payments. At this point, you will receive a “notice of default,” telling you that you entered pre-foreclosure. This document is necessary so that you will no longer have an excuse for your previous ignorance – and you will have to pay up.

At this point, you have three months until you reach foreclosure. If you don’t pay up, you’ll be out in the streets – and everything will take a hit. Your home, your credit, your investment – everything will be gone. Once you have been evicted out of your house, it might be very difficult for you to get a new mortgage.

Selling Your House

If three more months have passed and you still have not paid up what you were due, then you will get a “trustee’s sale notice.” This will basically inform you that your home will be sold so that the institution can receive the money you failed to pay. The house will be sold in an auction – and you will have to be forcefully evicted.

This embarrassment can be avoided if you manage to sell your home during pre-foreclosure. This way, you will be the one paying fees, using the money you got from the sale. You might still end up with debt – but at least your credit will not take such a big hit.

Final Thoughts

It’s not such a bad thing if you miss one payment but pay it as soon as possible. If you miss three payments, however, that’s when things get tricky – because, at six months, you will be forced out of your own home.

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