It’s easy to fall behind on your payments if you run into a financial emergency. This can lead to a series of missed payments and compound loan servicing late fees. It can be especially easy to fall into debt if you need to borrow money to pay off what you owe. For the best chance of avoiding late fees, establish an emergency savings account before you apply for a mortgage. Most experts recommend having at least 3 months of living expenses in your emergency fund.
The best step for you to take when you’re about to fall behind is to contact your lender. Explain your financial hardship. Your lender might be able to waive your late fee, especially if you have a long history of on-time payments. Or you may be able to work out a repayment plan or deferral that prevents you from defaulting on your mortgage.
Always speak with your servicer about how any relief option will impact your credit. Unless it’s a special situation like a natural disaster, lenders are typically required to report any payment arrangements that don’t reflect the payment due under the contract. Obviously, staying in your home can be worth any temporary credit hit, but if you know about the credit implications in advance, you can more effectively deal with them.