We've all been there before. Our car breaks down and needs expensive repairs, we get a larger-than-anticipated medical bill, or some other unexpected expense pops up - and we wonder if anyone will notice if our bills are a little bit late this month.
But when it comes to the mortgage, a late payment almost always comes back to bite homeowners, according to a recent article in the New York Times.
While fewer Americans are falling behind on their house payments, many of us are still delinquent. As of late last year, one in eight homeowners was either at risk of foreclosure or already in the foreclosure process.
Financial experts expect delinquencies of 60 days or more to increase in the first quarter of 2012.
It all starts with a simple missed payment deadline.
How Payment Deadlines Work
Typically a mortgage payment is due the first of each month, though some lenders give borrowers a 15-day grace period.
Homeowners often hope their late payment will make it within this period. But if your check arrives after the cut-off time on the 15th day, you're out of luck, no matter when you wrote your check.
So what happens next? Lenders tack on a late fee that's 2-5 percent of your payment (your actual fee should be listed in your mortgage documents). Now you owe a late payment and penalty, plus your next mortgage payment, which may be due in just a couple weeks.
It doesn't take much for one late payment to turn into several.
How Late Payments Impact Credit
Your late fee is nothing compared to the damage done to your credit score. Once 30 days have passed, your lender must report your delinquency to credit bureaus, which transfer the discrepancy to your credit report.
A credit score drop by as much as 100 points for the first late payment, and will continue to decline as the days go by. Each missed payment can stay on your report for seven years.
Ironically, many homeowners avoid filing for bankruptcy to protect their home from foreclosure because they worry about how bankruptcy will affect their credit. However, filing for bankruptcy in Atlanta may be the only way that Georgia borrowers can get current on payments, thus avoiding future credit dings.
How Missed Payments Lead to Foreclosure
Homeowners who can get their payments back on track before falling 30 days behind have the best chance at recovering.
Once you're 120 days past due, the foreclosure process can be triggered. Getting current with payments before 120 days can protect your home, but the problem is that once homeowners fall this far behind, it can be nearly impossible to regain control because credit marks and fees have piled up so overwhelmingly
Whether you're days late on your payment or have already received a foreclosure notice, Atlanta bankruptcy may be your best chance at getting current. Chapter 13 bankruptcy has the ability to reduce credit card debt and organize your remaining debt into manageable payments.
The sooner you take action, the easier it will be to catch up - and start fresh.
More Blog Entries:
Mortgages: Paying on Time, by Vickie Elmer, The New York Times