Can I Sell My House if I'm Behind on Payments?
Are you currently struggling with your monthly mortgage payments? Maybe you're also thinking that selling your home is your ticket out of this predicament.
Of course you can--as long as your home hasn't been foreclosed on.
The Foreclosure Process
Mortgage companies don't automatically start the foreclosure process just because of one missed payment.
In fact, for the first missed payment, all you'll receive is a notice of nonpayment.
Miss two consecutive monthly payments, and you'll get a demand letter, which sounds urgent and serious but as long as you reach out to your lender, you can both work out a solution on how to catch up on your missed payments.
However, if you're behind on your mortgage for three months (or 90 days), your loan will be considered in default and you will receive a foreclosure notice.
According to the Consumer Financial Protection Bureau, after 120 days of missed payments, your mortgage lender can legally take possession of your home and then proceed to sell the property in an effort to recoup the balance owed.
Although you can stay in the property while the foreclosure is underway (and the process can drag for more than two years), for many homeowners, the trauma and embarrassment of repossession and subsequent eviction is not worth it.
The good news? It need not reach that point.
When you're behind on payments, you can definitely sell your house on your own terms up until the day the foreclosure is granted, allowing you to escape this financial hardship and the negative repercussions it might have on your credit report for years afterward.
Selling Your House When You’re Behind on Your Mortgage
When you're behind on your mortgage, the first thing you must do is to assess your financial situation. It would be helpful to ask yourself the following questions:
“Is Financial Relief Forthcoming?”
"Will I be able to get current on my mortgage payments without having to sell my house?"
YES: You can consider alternative options below rather than selling property outright.
NO: You might be facing foreclosure if you don't act soon. Find a buyer who'll cover the remaining balance, either by a traditional sale or a cash home sale.
“Is My Mortgage Underwater?”
"Even if I do sell my house, it won't be enough to cover the mortgage debt!"
Having an underwater mortgage means a property's fair market value is lower than the amount owed. This presents a bind: for both you and your lender.
YES: In this case, you can do a short sale in order to offload your problem property. However, an added complication in short sales is that mortgage lenders have to be on board with the transaction so that the sales process would go off without a hitch.
NO: If there's no way for you to catch up on missed loan payments, then, selling your house might be your way out of this pickle.
Otherwise, reach out to your lender so you can figure out solutions such as a mortgage forbearance or a loan modification.
Most lenders would be amenable to working out a solution with you rather than initiate foreclosure proceedings, which is tedious and cost a lot of money.
Regardless, when you're behind on mortgage payments, time is of the essence. You have to act quickly to avoid foreclosure action from your mortgage company.
“How Do I Sell My House if I’m Behind on Mortgage Payments?”
Option #1: Doing a Short Sale
Simply put, a short sale means selling a house for less than what is owed. Since the lender is getting less than the amount of money they lent out, you must obtain their permission for the sale to go through.
In doing a short sale, you will be required to present a hardship letter explaining the reasons why you can no longer pay (medical bills, job loss, divorce, and so on), and a fair cash offer from a potential buyer. Just remember that in a short sale, you only get rid of the mortgage balance and you walk away with no money from the sale.
However, short sales are still preferable to a foreclosure, because they have a less devastating impact on your credit report and recovery is easier.
Option #2: Selling Your House With a Real Estate Agent
Your mortgage is not underwater, but you're behind on mortgage payments and have no way of being able to pay in a timely fashion. Fret not, you may still be able to sell it for top dollar with a real estate agent!
However, selling a house in the open market takes up to 180 days, and unfortunately, when you're behind on payments, time isn't on your side, so it would be best to find a real estate agent with a low DOM (Days on Market).
A DOM indicates the number of days a property spends on the market before being sold; therefore, a realtor with a low DOM means they can sell your house more quickly, ridding you of your mortgage woes sooner.
A downside of selling with an agent is the commissions you need to pay, as well as the closing costs once everything is said and done.
Additionally, your agent might recommend some updates to boost your curb appeal and attract prospective buyers, so you're definitely looking at some upfront extra costs too.
Option #3: Selling Your House Yourself Thru FSBO
Decide that paying commissions is not for you? Well, you could definitely use some extra cash.
The good news is you can absolutely take control of the whole process through For Sale by Owner (FSBO).
The drawback? A significant investment of time and energy is required, so you'll have to be ready to commit to the sale. There's also the mental and emotional toll of anxiety over being behind on your mortgage, so if you think you're not cut out for it, then consider...
Option #4: Selling Your House Fast to Cash Buyers
When you sell a house on the open market, the whole process is fraught with uncertainties.
You or your agent can only market the property so much, but there's no telling when the buyer will come knocking. Once there is a promising home buyer, both of you will be waiting for their lender to approve their loan.
The wait can be really stressful. Not to mention, you're still on the hook for mortgage payments while your house is sitting unsold!
Skip all of those by selling to a cash buyer such as a real estate investor, or a cash home buying company. Independent from lenders, they have more than enough money to purchase your house for a fair price and a fast sale--no waiting around for approvals!
What's more, when selling to a cash buyer, you can absolutely sell as is, without even bothering to stage your house or do even the most minor of repairs.
Once you accept their cash offer, they move fast and can close in about a week, rescuing you from a mountain of missed payments and helping you avoid foreclosure.
However, you must know that this convenience isn't free. To ensure a healthy profit margin for the real estate investor, they'll be buying your property for less than its market value. They have factored in possible repair costs, as well as all the necessary paperwork and legal work in getting the liens sorted with your lender.
Alternatives to Selling a House When You’re Behind on Mortgage Payments
Selling a house, via a short sale or a traditional one, is not the only solution when you're behind on payments. For starters, don't hesitate to reach out to your lender.
They may be able to grant you an extended grace period so you can get over this period of financial instability and catch up on any mortgage payments you may have missed.
Refinance Your Mortgage Loan
Refinancing pays off the first mortgage and grants you a new loan with new terms. As this is essentially a new loan, you may have to submit updated financial documents so you can tailor the terms to your situation.
Talk With Your Mortgage Lender Regarding Loan Modification
You can revisit the contract you signed with your lender when you first acquired the property.
Reduction of Principal
If you have built up enough equity, you can ask your lender to reduce the payments instead of pursuing foreclosure so you can keep up with the amounts you have to pay.
Variable-Rate Mortgage to Fixed-Rate
Are you one of those homeowners who were lured in by very low interest rates, only to find out later that your lender can increase it with wild abandon?
If you find the interest rate too onerous for you, request your lender to shift your loan into fixed-rate so you don't fall behind.
Mortgage Term Extension
If you don't want to sell your house, you can opt to extend your mortgage instead. Although you'll be paying a higher total amount over the life of the loan, the payments are already manageable, so you'll always be current with your mortgage and don't have to worry about falling behind.
Payment Postponement
When you're struggling financially, you don't have to do something as drastic and final as a short sale. Sometimes, simply asking to pay at a later date, when things are better, can be the solution you're looking for.
Ask for a Mortgage Forbearance
Your mortgage servicer may allow you to pause or reduce payments temporarily in case of financial hardship. You may need to present some financial documents such as
Final Thoughts: Selling a House if I’m Behind on Mortgage Payments
"Should I just sell my house if I'm behind on payments?"
When you owe money and things are looking bleak, deciding to sell your house can be a distressing and painful prospect. But, as we have seen above, there are plenty of alternatives that you can consider before letting go of your hard-earned property.
The important thing is, don't wait until it's too late to act!
Here at House Buyer Network, we can help connect you to buyers who will be able to give you a fair cash offer when you ultimately decide to sell.
Just fill in our form below with your property address, email, and phone number to get your fair cash offer today! Once you accept, we can close as fast as you need, so you can soon put all the stress and hassles behind you.
If you want to learn more about our process, just dial (855) 835-2544 and we'd be happy to be of assistance!
