When FHA borrowers get into financial trouble, the best thing to do is to get in touch with the FHA and the lender immediately to start damage control. This helps avoid the borrower going into default or foreclosure on the FHA loan. Some borrowers mistakenly think that they are in foreclosure territory after missing one or two payments–but many more wrongly believe they have much more time even after missing two or more payments before the foreclosure proceedings start.
The truth is that the foreclosure often varies depending on the state and the lender. How much time does a borrower have before going into default and foreclosure in general?
In a previous blog post we discussed the earliest stages of financial trouble–the area where FHA borrowers are likely to be just before missing an FHA mortgage payment for the first time. The intermediate stage is where the borrower is not only having trouble paying all their bills in the same month, but are also experience trouble finding enough money to pay their credit card bills and other obligations AND their FHA loan payment.
The process is sometimes gradual–it becomes harder and harder to make that monthly payment until finally the borrower feels they must use that money for some other important need. Soon, the home loan payment is missed and the lender will put the borrower on notice that payment is required.
Missing the first payment doesn’t automatically put the borrower into foreclosure mode, but the lender will get in touch by phone or by mail to discuss the situation. This is the stage where a smart borrower is proactive, contacting the bank and the FHA to discuss the situation.
The best thing to do is to make the call before the payment is missed, to help the FHA borrower minimize service charges or penalties for a missed payment. The lender can help work out a plan to get the borrower through the financial crisis, often with normal payments resuming once the buyer is on solid financial ground once more.
The buyer should call the lender first, then call (800) 569-4287 to get assistance from HUD including a housing counselor. If the lender seems unwilling to work with a buyer, FHA counselors may have advice that can help. Dealing with the danger of an FHA foreclosure in this stage of financial difficulty is best. In another blog post we’ll look at what happens when the buyer misses two payments or more.