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Many Americans have fallen behind on their bills during the coronavirus pandemic, and that extends to homeowners. In fact, a lot of people have become seriously delinquent on their mortgage payments, defined as not making a payment for 90 days or more.
But new data reveals that fewer Americans are at that point now. In fact, the number of mortgages that are seriously delinquent dropped by 43,000 in September, according to Black Knight. That's the first improvement in that data point since the pandemic began back in March.
That said, homeowners aren't totally out of the woods. There are still a whopping 2.32 million borrowers who are seriously delinquent on their mortgage payments (per the definition above), but not yet in foreclosure. That represents 1.88 million more borrowers than in September 2019.
What to do if you're worried about being delinquent
Falling behind on your mortgage payments is not a good thing. Being delinquent on those payments could seriously damage your credit score, making it difficult or impossible to borrow affordably when you need to. And it could eventually put your home at risk of foreclosure. To be clear, your mortgage lender won't start foreclosure proceedings after a single late payment. But a late payment could make a huge difference in your credit score.
If your income has taken a hit this year and you're worried about making your mortgage payments, there's a fairly simple solution: Put your home loan into forbearance.
During the pandemic, you can't be denied forbearance, and you're entitled to up to 360 days of it. You'll get an initial 180-day forbearance period, but you'll have the option to extend it by another 180 days if needed.
Forbearance doesn't forgive your mortgage payments. Rather, it allows you to hit pause on paying without it negatively affecting your credit score or putting you at risk of foreclosure. You'll have to make up those payments once your forbearance period ends, and how you do that will depend on the arrangement you come to with your lender. In other words, you may get six months to catch up on those missed payments or a year -- or more or less.
If you don't want to completely stop making your mortgage payments -- say, you can partially afford them -- you might instead ask your lender to modify your loan's repayment terms. You can also try refinancing to a lower mortgage rate to see if that reduces your monthly payments enough to make them manageable. Avoiding forbearance means you won't get stuck in payment catch-up mode once that period ends, so it pays to explore alternatives. That said, you are allowed to pay your mortgage while your loan is in forbearance, so if you can swing partial payments, that's an option too.
Don't hesitate to seek help
Falling behind on your mortgage is a good way to damage your credit and add to your financial stress. Rather than go that route, see if forbearance makes sense for you. It's encouraging to see that serious mortgage delinquency rates have declined since the start of the pandemic, but you don't want to join the millions of borrowers who still fall into that category.
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