What happens after I miss a mortgage payment?
After the grace period, the servicer charges a late fee and starts calling and writing. After two or three missed payments you will get letters about options and a notice that the loan is in default. Federal rules generally stop the servicer from filing a foreclosure until you are more than 120 days behind.
That 120-day rule comes from federal mortgage servicing rules (12 CFR 1024.41). It is not a grace period, though: interest, fees and the amount needed to catch up keep growing the whole time. The earlier you act, the more of your equity you keep and the more options stay open.
What can I ask my lender for?
Ask your servicer about a repayment plan (catching up over several months), forbearance (a temporary pause or reduction), or a loan modification (a permanent change to the loan). Ask what paperwork they need, send it quickly, and keep copies of everything.
- Repayment plan: works when the problem was short and your income is back.
- Forbearance: works for a temporary hardship, but the missed amount still has to be paid later.
- Loan modification: works when you can afford a lower payment for the long term.
A HUD-approved housing counselor will help you with this for free. Call HUD at (800) 569-4287 to find one near Cincinnati.
When does selling make more sense than catching up?
When the payment no longer fits your life, the house needs repairs you cannot afford, or catching up only delays the same problem. Selling while you still have equity pays off the loan and puts the rest in your pocket, which a foreclosure will not.
There is no shame in deciding the house is not worth the fight. A lot of people I talk with feel relief once they stop trying to hold on to something that was costing them sleep every night.
If a foreclosure has already been filed, read facing foreclosure in Cincinnati. If a sheriff sale date is set, read selling before a Hamilton County sheriff sale.
How does a sale pay off a mortgage I'm behind on?
The title company asks the servicer for a payoff letter, which includes the missed payments, interest, late fees and any other charges. That amount is paid from the sale price at closing. You get what is left, and the loan is closed.
If the house is worth less than the payoff, the lender has to approve taking less, which is a short sale. That takes longer and needs their paperwork. I will tell you whether your numbers point that way before you spend time on it.
Will selling hurt my credit?
The missed payments are already reported. Selling and paying the loan in full stops any more from being added and avoids a foreclosure judgment, which does much more damage and stays on your report for years.
Everyone's credit is different. A housing counselor can walk you through what each option does to yours.
What if I'm behind because of a divorce, a death or a job loss?
Those are the most common reasons, and each has its own considerations. Tell your servicer, because some programs are built for exactly these hardships. And if selling is the right step, I can work around a divorce or an estate.
See selling during a divorce and selling an inherited house.
This page is general information, not legal advice. For your situation, talk to an Ohio attorney.
Greg Carpenter is a licensed real estate agent in Ohio. When Deforest Solutions makes you an offer, Greg is buying the house for himself, not as your agent.