In the first part of this series I discussed what happens when you stop or are unable to pay your mortgage and the bank begins the foreclosure process.
As I explained before the foreclosure process is a long procedure taking several months to a year.
In most cases the bank IS willing to work with you in order to get your mortgage back on track.
The first and most important step in getting your bank to work with you is communication.
If you want to keep your house then you must tell the bank what is going on, why you are behind, and how you would like to try and bring your loan current.
There are a lot of simple ways people use to bring their loan current in the first stages of foreclosure.
Since we are in the tax season, some people use their tax returns to bring their mortgage current.
You can also search other places that you may be able to pull a lump sum of cash from in case of an emergency.
For example, I have seen families use an advance on an annuity, in some cases you may be able to use funds from an IRA or a child's college fund if you explain to you IRA administrator or the college fund that the funds are needed for an emergency, although you may be subject to some stiff penalties.
The most common way to bring your mortgage current is to talk to the bank and ask them if you can make a repayment agreement.
A repayment agreement is an agreed upon payment plan between you and the bank which allows you to pay a little bit more than your normal mortgage payment each month until you have paid the full amount of money that you were behind on.
This plan is usually best for someone who has had a temporary setback and they just need help getting back on their feet.
For example, if you had a temporary job lay-off or had a family emergency that caused you to fall behind this would probably be a good solution for you because you don't have any long term problems that would prevent you from paying in the future.
In order to do a repayment agreement you must call the bank and explain your situation and what caused you to fall behind.
After that the bank representative will usually ask you some financial questions such as how much you bring home monthly and what are your expenses.
If your income and expenses qualify then you will be allowed to enter into a repayment plan.
But be careful, some banks will ask you to come up with a large amount or a monthly payment that you may not be able to reasonably afford.
If you cannot afford what they are offering, then be sure to let the bank representative know and they will try and change the terms, because if you break this agreement some banks will not allow you to get back into a repayment plan.
Next week I will discuss what other options you have if you want to stay in your home including loan modifications.
If you have any questions about saving or selling your home when faced with financial difficulty please email me and I will answer your questions in my column.