What Happens If You Can’t Pay Your Mortgage Payment?

What happens if you can't pay your mortgage payment

What happens if you don’t pay your mortgage payment? One of the scariest things that many homeowners have to face is the possibility of foreclosure. When you are faced with the prospect of being unable to pay your mortgage, and the possibility of losing your home, it can be very demoralizing. But there are programs that can help you (more on this in a moment).

And perhaps more importantly, you won’t lose your home immediately when you miss one mortgage payment. There is a process that follows whenever you can’t make your mortgage payment, which I’ll explain in detail below:

The First Consequences of Not Paying Your Mortgage

The process a lender has to follow when foreclosing on your home differs by state. Some states require that the lender foreclose through the court system, while others don’t require the same level of legal requirement. Here is a general timeline of what happens when you can’t pay your mortgage — although you should check with your state for individual specifics and possible variations:

  • Missed mortgage payment: Most lenders require you to make your payment by the first of the month, but have a grace period that lasts until the 15th. Once you are past the 15th of the month, a fee might be assessed and your payment considered delinquent.

  • Credit score hit: You’ll probably receive a notice and/or a phone call as early as the 16th day of the month. However, it’s not until you are 30 days late that many lenders decide to report you to the credit bureaus. Once reported on a missed/late mortgage payment, your credit score takes a hit. It can be as much as 100 points.

  • Demand/breach letter: Your mortgage is considered in default once it reaches 30 days late. You will probably receive some sort of demand/breach letter about your mortgage when it is somewhere between 45 and 60 days late. This letter informs you that foreclosure could be coming if you don’t pay.

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The Next Stages of the Foreclosure Process

Then, after 30 days, there are more serious consequences:

  • You’re on notice: Sometime around day 60 (or a little after), your credit score will likely take another hit, and you’ll be put on notice. You’ll receive a letter stating how much you owe on your mortgage, including penalties, to bring it up to date. If you don’t pay up, foreclosure could be next.

  • Foreclosure process starts: The biggest first hit to your credit actually comes when you are 30 days late on your mortgage payment. However, reaching the 90-day mark can bring your score down another 20 to 30 points (or more). This is also the point at which your lender usually begins foreclosure proceedings.

Depending on the state you live in, it can take anywhere between another 90 days and as much as three or four years to complete the foreclosure process. When your home is foreclosed on, the bank owns the property, and can try to sell — and usually does try to sell it — at auction. You can stop the foreclosure process by bringing your payments up to date. A lender might also decide to let you complete a short sale in order to avoid foreclosure, if that seems a better financial options for the lender.

How to Avoid Foreclosure in the First Place

If you can’t pay your mortgage, it’s better to approach the lender up front, rather than wait until things get messy. Just ignoring the problem won’t make it go away. Instead, call your lender when you know you are having problems. You might be eligible for a refinance or a loan modification that can make your payments more manageable.

The federal government has two programs that are intended to help homeowners who may be struggling with making their mortgage payments. These were both set up in the aftermath of the 2008 housing market crash and global financial crisis (and both have been extended until 2015). The first, known as HAMP, assists homeowners who have missed payments and are in danger of foreclosure to get a refinance that will help them make their monthly payments. The second, known as HARP, does the same thing for homeowners who have not yet missed any payments but are concerned about not being able to make mortgage payments in the future.

Another possibility you should know about is that the lender might be willing to agree to forbearance or deferment if your situation is temporary. Working with your lender when you can’t pay a debt is your best first option.

All in all, the sooner you address the issue, the sooner you can work on a solution. Hopefully this post helps you understand what happens if you don’t pay your mortgage payment. If your are struggling with this right now, we wish you the best and we’re here to answer any questions you post in the comments. (And remember, ReadyForZero can help you organize and pay off your debt!)

Image credit: fallesenphotography

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  • Katie

    Hey, I need some advice.

    It is a very long story and cannot discuss over internet. Please contact me. I don’t know what I should do, I just know I need to do something. It is for my best friend and I have been sought out by another family friend about this matter. Thank you.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Katie, you can email us at “Ask” at readyforzero.com, but keep in mind that we’re not able to give personal financial advice – only general financial advice.

    • David Suleiman

      so sorry to hear about your loss

  • Carrie

    Does anyone from the bank actually come to your house if you don’t pay your mortgage payment? Just wondering.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Carrie, not that I’m aware of. Usually the bank will begin by calling you or sending mail to your address. However, I would recommend doing more research to find out exactly what consequences may result from not paying. It’s a good idea to call your lender and see if you can work out some kind of agreement. Best of luck to you!

      • Mike

        Hi, I read your question, and the answer is yes they do come to your house. In my mothers case because she could not pay her mortgage and weren’t able to reach her by phone they did come to the house but only to inform her that she qualified for a loan modification. They were very nice and didn’t demand anything. But they did take a lot of pictures of the property. About a few weeks to a few months later they came again and repeated the process. This is Bank of America. I don’t know if they come to your house if you answer your phone.

        • http://www.twitter.com/bwfeldman Benjamin Feldman

          This is interesting – thanks for sharing your first-hand experience, Mike!

  • David

    What if u haven’t paying your mortgage over 2 years

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi David, in that case your debt would have probably been sold to a debt collector of some kind and there would usually be an unpaid debt listed on your credit report which would hurt your credit score quite a bit. However, with mortgages there has been some variation lately because of the subprime mortgage crisis. It’s possible that your original lender still owns your loan and they have not yet reported it or taken action on it. I’d first recommend going to AnnualCreditReport.com to see your credit report. That should help you figure out who owns your debt at this point. Good luck!

  • jose alicea

    I live in Florida and I’m 3 month late on my mortgage the bank send me a letter which is a default. I have 30 days to but I know I won’t be able to. Pay don’t know what to do

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Jose, I would recommend researching all your options and try to be proactive so you can get the best outcome, whatever that is. One place to start is our resource center: http://blog.readyforzero.com/resources/mortgage. Also look into every option, such as short sale, modification, federal assistance programs, etc., and don’t be afraid to call your lender and talk about what they can do to help you. Good luck!

  • Lori

    I am in an active chapter 13 bankruptcy going on 2yrs and 7mo. Unexpectedly i have a temp hardship and unable to pay for this months mortgage payment. To keep this matter out of court what can i do to rectify this missed payment. This will be my first missed payment.

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Hi Lori, unfortunately with such a specific question I’m not able to help you much. That’s because it ultimately will depend on how much flexibility your lender is willing to give you. I’d recommend contacting them and explaining that you will be able to make the payment very soon (if that is in fact the case).

  • richard

    My step son has not pay a house payment for 5 years and they still have not foreclose on him

    • http://www.twitter.com/bwfeldman Benjamin Feldman

      Oh wow, that’s interesting! I wonder if the bank feels it is not worth foreclosing on? Or if they don’t have the proper paperwork? Thanks for your comment.

    • David Suleiman

      section 8