Q:I know this has nothing to do with buying or investing, but I was hoping you could me help me. I am eight months ($8,000) behind on my mortgage payments. I fell behind last year during the hurricane season and a surgery right afterward. I can afford the monthly payments, but the mortgage company wants the entire past-due amount. It won‘t refinance my loan or make other payment arrangements.
The mortgage company keeps telling me that my income is not enough. My husband is on Social Security and I work full time. Can you point me in the right direction for help on saving my home?
A: I get some variation on this question several times a week.
Home, as you know, means different things to different people — this becomes more evident than ever when you’re face to face with the prospect of losing yours. When homeowners fall behind on their mortgage, they tend to take stock of their lives and re-evaluate what’s truly important to them. What they conclude depends on a mix of their personal values, current financial situation and future prospects.
A surprising number, faced with escalating payments, overextended finances, decreasing or interrupted income and upside-down home values, truly rethink real estate and conclude that the house is just a building, and not worth keeping if it places an excessive burden on their lives.
Many millions, though, have decided that their home is their most valuable possession — no matter how diminished its current value from the peak — and, like you, gear up for a knock-down, drag-out battle to keep their homes.
Why am I taking you here? Well, I want you to get clear on where you fall on this spectrum. How committed are you to keeping your house? I think you might fall into that group of folks willing to be warriors to hold on to your home. If so, get clear on that — and stay clear, because it might take everything you’ve got.
Here’s where I get to do some myth-busting. I’ve done this dance with so many homeowners over the last several years that my bag of tricks has run dry. There are certainly a few strategies you should exhaust, such as talking with a HUD-affiliated organization like NACA.com, to see if they can help. But beyond that, the advice I have for you is something I’ve wanted to say to many, many homeowners.
Please know that I’m reversing my normal course and being very blunt here, because I want to make sure you understand me clearly — please understand that my intent is not to be rude. In fact, if you’re easily offended, stop reading.
Make more money. Spend less. Document both. The end. …CONTINUED
I’m not kidding. Most loss-mitigation staffers reviewing loan-modification applications are charged with granting a modification only if the modified mortgage payment will be less than 40 percent of your gross income — some lenders and programs actually cap it at 31 percent!
So, if you make more money, by getting a second job or by taking in a renter or anything that can be documented, you might have a stronger argument in favor of your modification. If you are able to significantly decrease your expenses, that might help, too, but if your lender has expressly said that you don’t have sufficient income, more income might be the fix.
I’ve received similar questions to yours from numerous people who have lost their jobs, stayed home with the kids, gone out of business or had their work hours reduced, and my answer to all is the same — do everything within your power (and within the law, I might add) to make more money, document it, and provide that documentation to your lender immediately.
1. If possible, get your bank’s loss-mitigation negotiator to tell you how short your income is, according to their guidelines, so you can have a target for how much more you would need to make. And make a note of the date and individual who provides you with that information.
2. Do whatever you can to increase your household income — consider taking a second job or renting a room.
3. Research whether there’s any work your husband can do without disqualifying himself for his Social Security benefits and, if so, put that in motion.
4. Document all of this additional income, and submit the documentation to your lender.
Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.
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