Missing a mortgage payment can be stressful, but it doesn’t necessarily mean your credit score will tank or that you’re going to lose your home.
Here’s what to expect:
When you’re 1 day late
Don’t worry just yet. Most mortgage payments are due on the first of each month. If your mortgage servicer doesn’t receive your payment by that date, the payment is technically late, but you may not suffer any consequences just yet.
That’s because most mortgages have a grace period – or a set amount of time after the due date in which your payment can be made without incurring a penalty. For most mortgages, that grace period is 15 calendar days. So if your mortgage payment is due on the first of the month, you have until the 16th to make the payment. After that, your servicer may charge you a late fee.
When you’re 15 days late
Your grace period typically ends after 15 days. At this point, your lender my assess a late fee. The fee can be charged each month that you miss a payment.
And that late fee isn’t just a slap on the wrist — Adam Smith, President of the Colorado Real Estate Finance Group in Englewood, Col. said late fees typically run around 4 to 5 percent of the overdue amount.
Section 6, Borrower’s Failure to Pay as Required, of Form 3200 shows your grace period and the late fee that applies. For instance, it might say:
“If the Note Holder has not received the full amount of any monthly payment by the end of FIFTEEN calendar days after the date it is due, the amount of the charge will be 5.0000% of my overdue payment of principal and interest.”
So, for example, if your monthly principal and interest are $1,700, a five percent late fee would be $85.
When you’re 30 days late
Once you’re 30 days late on your mortgage, your servicer may report the delinquency to the credit bureaus. We’ll delve into the impact on your credit score later on.
By the 36th late day, federal law requires the servicer to try to make contact with you. If they don’t receive a response, the servicer may send a Notice of Default, which may give you 30 days’ notice to pay your mortgage balance, plus any accumulated interest, in full.
Despite the harsh wording, in reality, the laws in most states give you more time to work out payment arrangements before foreclosure. Plus, most lenders would rather work with you to get your mortgage payments current.
When you’re 45 days late
At this point, the government requires your servicer to assign a company staff member to your file. This person is tasked with connecting you to available assistance options and answering any questions you may have. You will receive a written notice of this assignment.
When you’re 60 days late
By now, you’ve missed two monthly payments and you’ve likely been assessed late fees twice. Your lender has probably called several times, making an effort to discuss why you haven’t made a payment.
If you’re having financial troubles, it may be difficult or embarrassing to discuss, but don’t ignore your lender’s calls. They may be able to work with you or refer you to resources that can help.
When you’re 90 days late
Once you’re missed three payments in a row, your lender will likely send another, more serious notice, known as a “Demand Letter” or “Notice to Accelerate.” It’s essentially a notice to bring your mortgage current or face foreclosure proceedings.
The process and timeline for foreclosure varies from state to state. You can look up information on your state’s laws and procedures here.
When you’re 120+ days late
If you haven’t paid the full amount due or made other payment arrangements by the end of the time frame spelled out in the Demand Letter, your lender will refer you to their attorney, who will schedule a foreclosure sale. You’ll receive a notice by mail, have a notice taped to your door, and the sale may be advertised in your local paper.
Per CFPB regulations, your mortgage servicer can start the foreclosure process once you’re 120 days behind on your payments, unless you have an active application for a foreclosure prevention option, such as a loan modification or short sale.
You have until the date of sale to make arrangements with your lender to pay the amount owed. You may also be responsible for paying attorney fees.
How a late mortgage payment affects your credit
Once your payment exceeds 30 days past due, the lender may report the late payment to the credit bureaus. Just one late mortgage payment can negatively affect your credit score.
The impact of one late payment will depend on your overall credit history and the credit bureau’s model for calculating your score, but a single 30-day delinquency can drop an otherwise excellent rating anywhere from 50 to 100 points, according to Fannie Mae.
Your credit report will show whether the payment was 30, 60, 90 or more days late. The longer your payment is delinquent, the worse it will impact your score. Going into foreclosure also negatively affect your credit score, and the foreclosure will remain on your credit report for seven to ten years.
Can’t make your mortgage payment? Help is available
“If you cannot make your payment, it’s always best to be proactive,” Smith said. “Call your mortgage servicer and talk to them. Seek out foreclosure prevention assistance and hotlines. Do everything you can but do not ignore the problem.”
HUD maintains a director of approved housing counseling agencies. These experienced and trained professionals can advise you on preventing foreclosure, protecting your credit and other issues.
Whatever your course of action, the housing counselor will explain which documents you’ll need to provide to your mortgage servicer to start the process, and they may even be able to contact the mortgage company on your behalf — and their foreclosure prevention counseling services are available free of charge.
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