Homeownership is a major milestone — but it comes with significant responsibilities. While missing a mortgage payment may seem minor, it can have substantial negative consequences if not addressed promptly and correctly.
Champions Mortgage, the leading mortgage broker in Houston, TX, provides some critical information about mortgage delinquency and how to handle problems before they spiral into major life events like foreclosure risk.
What Is Mortgage Delinquency?
When a homeowner misses a mortgage payment and doesn’t make it up during the applicable grace period, the status of the loan changes to mortgage delinquency. The status goes into effect when any payment is more than 30 days late. At that point, a lender reports the late payment to credit bureaus, negatively impacting your credit score.
Initial mortgage delinquency results in late payment fees but can quickly escalate into a much more serious situation. The terms of the mortgage and loan agreement further determine at what point the lender can declare a loan default and initiate foreclosure.
Mortgage delinquency jeopardizes the ownership of your home and can have long-term financial impacts.
It’s important to know that lenders prefer avoiding foreclosure whenever possible. However, as loan delinquency rates have increased recently, lenders have been forced to more aggressively enforce default provisions.
Nevertheless, borrowers must immediately address missed mortgage payments to avoid escalating problems.
How To Avoid Mortgage Delinquency
Preventing mortgage delinquency is the best course to maintain financial stability. Here are proactive steps to avoid payment arrears:
- Budget wisely. Make sure that your total mortgage payment, including taxes, insurance, and homeowners association fees, realistically fits into your budget.
- Emergency savings. Build a savings cushion to cover unexpected events like job loss or major medical events.
- Refinance. If you are struggling with high mortgage payments, refinancing your loan could provide relief through lower payments. This usually requires a lower interest rate, a longer repayment term, or both.
Solutions for Mortgage Delinquency
Facing loan delinquency can be daunting. Here are some of the steps to consider in the event of impending missed mortgage payments:
- Contact your lender immediately. As soon as it is clear that you could miss a payment, contact your lender. Explain your situation and they will likely help you explore options to avoid delinquency, including repayment plans or temporary relief programs.
- Agree to forbearance. Some lenders will consider agreeing to forbearance for a time. This allows you to temporarily reduce or pause payments during a temporary financial hardship. Of course, you will remain obligated to repay missed payments later, either through higher monthly payments, an extension of the loan term, or a lump sum payment.
- Loan modification. Lenders may consider modifying your loan agreement to reduce payments or extend the repayment period in order to avoid loan default.
- Establish a repayment plan. If you have recovered financially, you could offer to pay arrears through a monthly amount added to your ongoing regular loan payments.
- Consider selling the home. Sometimes, a short sale is the best option available. This means selling your home for less than the amount needed to pay off the loan. This process can be less damaging to your credit than going through foreclosure.
Contact Champions Mortgage for Home Financing Solutions
Champions Mortgage’s unbeatable rates, personalized service, and mortgage expertise are here to promote your successful homeownership.
Let us be of service if you have concerns about mortgage delinquency or are just interested in some expert advice. Look at our mortgage loan calculator and talk with us about solutions that fit your situation.
Call Champions Mortgage today at (281) 727-2500 to learn more about how we can help you! Request assistance today.
