What Are Mortgage Delinquencies?

Delinquent mortgage payments can result in losing your home and can seriously damage your credit rating.

Delinquent mortgage payments can result in losing your home and can seriously damage your credit rating.

Buying your first home is an exhilarating experience and one of life's milestones. You accumulated the down payment, qualified for the mortgage and moved in. Now that the furniture is in place and the window treatments are up, it is time to face the financial realities of home ownership and protecting your investment.

Understand Your Mortgage

When you bought your home, you signed an important legal document between you and your mortgage company. While the terms were probably reviewed with you prior to and during the closing, you should read through the entire document including any fine print. Ignore this at your own peril. Particularly, you should understand when your mortgage payment is due and what happens if you miss payments or if your payments are late.

Mortgage Delinquency

Mortgage companies and banks take a dim view of late and missed payments. They are in business to make money by charging interest on the loan they made to you to buy your home. If your payment is late or you failed to make it, the bank does not make the amount of money they contracted for. Your payment is delinquent if the lender receives it after the due date. There are degrees of seriousness for late or non-payment.

Late Fees

Generally if you make your payment within 15 days of the grace period, the lender will charge a late fee and you will not suffer any undue consequences. Be careful, though. Late fees can be considerable. If you are consistently late with your mortgage payment each month, you will easily rack up hundreds of dollars in late fees in a short amount of time. Think of how many flat screen TV's you could buy with that.

One Payment Late

If you are one payment late beyond the grace period or if you miss one payment entirely, you start to be in financial hot water. Your lender will report you to the credit reporting bureaus. This will affect your credit rating adversely and your ability to secure credit in the future.

Two or More Payments Delinquent

If you are two or more mortgage payments behind, your home is in serious jeopardy. You had better make specific arrangements with the lender to get your account current. And remember, you are also accumulating late fees, and those have to be brought current as well. If you are three or more payments behind, the lender's attorney may start foreclosure proceedings against you and you could easily lose your home. The entire balance of the loan may then be due immediately to forestall foreclosure.

Keep a Rainy Day Fund

Keep a rainy day fund in an amount equal to several months' mortgage expense in the bank and earning interest. Do not use this money for more flat screen TV's or any other expense. It is only meant to pay the mortgage in the event of job loss or other unforeseen financial need.

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About the Author

Lisa Nielsen is a marketing consultant for small businesses and start-ups. As part of her consultancy, she writes advertising copy, newsletters, speeches, website content and marketing collateral for small and medium-sized businesses. She has been writing for more than 20 years. She is also a business strategist, trainer and executive coach. Nielsen holds a Master of Business Administration from the University of Miami.

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