Losing your job could throw your entire life into disarray. If you have a mortgage to pay on a Boston Beacon Hill condo, your situation may seem even more frightening as you face losing your Boston high rise condo and serious damage to your credit. However, the situation is far from hopeless. There are many ways to prevent a mortgage default.
Check Your Insurance Policies
Many insurance policies cover mortgage payments during unemployment. You may have coverage even if you don’t remember buying it, as this type of coverage can go by many names, including Involuntary Unemployment Insurance and Job Loss Insurance. Some of these policies are even offered for free with other mortgage insurance products. If you become unemployed within a specific amount of time after buying your home, typically two years, the policy may pay the full monthly amount for home insurance, mortgage payments, and taxes, usually for up to 6 months.
Contact the Lender
One of the most important but difficult steps to take after losing a job is contacting your lender. Don’t wait until you become late on your mortgage. The earlier you call, the more time you have to prevent defaulting on the loan. Your lender may help you set up a payment plan to avoid foreclosure before you miss payments if you can supply a hardship letter explaining your situation.
Ask for Forbearance
After you send a written hardship letter to your lender, you may qualify for forbearance that temporarily lowers the payments or suspends your payments entirely for a short time. Many nationwide lenders participate in the Home Affordable Unemployment Program that can suspend payments or reduce payments to no more than 31 percent of your gross income while you search for a job. To be eligible for this program, you typically must be eligible for unemployment benefits and live in the home.
Get Help Through a Government Program
If you don’t qualify for forbearance with your lender, you have another option if your mortgage is guaranteed or insured by the USDA, VA, FHA, Fannie Mae, or Freddie Mac. These government organizations offer programs to help you pay your mortgage during your job search. Some home loans qualify under the FDA’s Home Affordable Modification Program, which gives you an interest-free government loan that does not need to be repaid provided you remain in your home.
Ask About a Loan Modification
Forbearance isn’t the only option available through your lender. If you are in danger of defaulting, loan modification may be a good option. A modification will permanently alter your home loan to add past-due payments to the balance to bring the loan current, lower your interest rate, or increase the remaining term on the mortgage.
Consider Other Options
If these solutions do not work for you, you are not out of options. You may make the decision that the best choice is moving out of your home. In this case, you can attempt to sell your home yourself or, with your lender’s permission, sell the home at its market price, even if you owe more on your mortgage. You may even qualify for financial assistance to help with your move. After exhausting other options, you may also consider filing for bankruptcy, which can delay or even prevent foreclosure if you can work out a new arrangement with your lender or catch up on your mortgage.
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