Can I Sell My House if I'm Behind on My Loan Payments?

Can I sell my house if i'm behind on my mortage?

1 Answer

The simple answer is yes, if you are behind on your loan you can sell your home; but recognize when you do sell your home the payments you missed will be due and penalties will be associated. Selling your home becuase you are behind on your mortgage is a smart financial decision if you areĀ unable to get current, make the payments and are living house poor.

Bottom line, in a situation such as this (for whatever the reason - pay cut, medical expenses, etc...) you are living above your means and drastic action should be taken sooner rather than later to ensure no serious long term ramifications stem from this. How drastic should the action be, it depends on your situation... perhaps selling a car will afford you more monthly capital to retain your home, the point is now is the time to reel in unnecessary expenses, and reevaluate your current financial situation.

If you do look to sell your home when you are behind on the mortgage, recognize the lender will expect payoff in full, meaning everything that is owed to him (missed payments as well) is paid back when you sell the home. People that have an equity position of 10% or higher, this is typically not a problem (6% sales commission for the agents - but try to negotiate it down, and another 4% to cover missed payments and penalties - point in fact it should not total 4% and you should walk with some money albiet not very much) because they have a large enough equity position to sell and pay everything back. Those that do not have this large of an equity position or are upside down, meaning you owe more than the home is worth, you may have to look into a short sale to accomlish selling your home. Short sales require lender approval, but just because you are behind in your mortgage does not mean they will not agree to a short sale.

Finally if you are behind in payments, have an equity position and are looking to sell before the bank forecloses, understand that most lenders will wait until a borrower is five months behind; 120 days late is a number you want to avoid. Now if you are thirty days late, then make a payment the following month, you are still 30 days late... this is known as a rolling 30... 60 day lates can roll as well as 90s... know how late you are in the eyes of the lender, and make sure you never approach that 120 day mark otherwise you will get an NOD ( Notice of Default) and the full amount will become due to remove the NOD (full amount of late payments plus penalties). This is important information for homeowners to understand in order to protect their equity position should they find themselves behind.