Homeowners who pay their monthly mortgage payments late risk losing their homes. If a homeowner can help it, staying current with mortgage payments prevents future financial problems. Situations occur at times, however, that make paying the mortgage more challenging, such as an unexpected illness or job loss. In these circumstances, some homeowners must accept lower-paying jobs. Depending on their income, borrowers may be unable to pay their mortgage payments on time, or they may be unable to pay them at all.

Foreclosure

Late or no mortgage payments can result in foreclosure. Depending on the state, lenders only have so many steps they must complete, and so much time they have to wait, before they can foreclose on a home. Once the lender completes all required steps, foreclosure is imminent. The lender schedules a sale date with the sheriff’s office, and the home is auctioned off.

Bankruptcy

For homeowners who are behind on payments, wish to keep their homes and can make mortgage payments going forward, bankruptcy may be the only way their homes may be saved. Filing Chapter 13 bankruptcy keeps a lender at bay until the federal court makes a determination regarding the case. The bankruptcy filing activates an initial stay period whereby all foreclosure activity stops. Once the court trustee approves the bankruptcy schedule and payments, the homeowner must continue to pay monthly bankruptcy payments throughout the lifetime of the bankruptcy, which typically runs three to five years.

Credit Reporting

A mortgage in arrears results in negative information being reported to the three major credit reporting agencies–Trans Union, Equifax and Experian. Negative marks on a credit report, such as late payments on a mortgage or bankruptcy, significantly reduce a homeowner’s credit score. Borrowers with low credit scores typically pay higher interest rates for future loans or credit cards, because creditors and lenders view them as higher risks.

Staying Behind

Being behind on a mortgage makes it difficult to catch up. A lender sometimes allows a homeowner to catch up on arrears over time if a homeowner can prove he has the financial capacity to do so. The homeowner already had a difficult time keeping up on the mortgage payments. Catching up on arrears presents an even greater challenge to maintain monthly mortgage payments.

Future Home Purchase In Doubt

Any future home purchase may be jeopardized by late mortgage payments. Lenders often will not consider a borrower for a new or refinanced mortgage for a minimum of two years after the date of a bankruptcy or the remedy of late mortgage payments. One late mortgage payment may not affect a lender’s decision, but a number of late payments will.