Can I Sell My House in Alabama if I’m Behind on Payments?
Recent reports show that millions of homeowners across the U.S. are behind on their mortgage payments. If you’re one of them, you may be asking yourself: “Can I sell my house if I’m behind on payments?” The good news is, yes—you do have options.
In this guide, we’ll explain how to sell your house when you’re behind on mortgage payments, what strategies fit different financial situations, and alternatives that may help you avoid foreclosure while regaining financial stability.
Can I Sell My House if I’m Behind on Payments?
Yes, you can still sell your home even if you’ve missed payments. Your options will depend largely on whether your home has equity (worth more than you owe) or if it’s underwater (worth less than your mortgage balance).
1. If Your Home Has Equity (Worth More Than You Owe)
If your property’s value is higher than your outstanding loan, you’re in a favorable position. A traditional home sale may allow you to fully pay off the mortgage, clear any late fees, and even walk away with extra funds in your pocket.
Best Selling Option: Traditional Home Sale
Work with a local agent or team: An experienced agent can help you set a competitive price and market your home effectively.
Set the right price: Compare recent sales in your neighborhood to ensure your home sells quickly without leaving money on the table.
Make minor updates if possible: Small improvements like fresh paint, landscaping, or repairs can make your home more attractive and help it sell faster.
Time the market: Selling during a seller’s market often results in quicker sales and higher offers.
2. If Your Home Is Underwater (Worth Less Than You Owe)
If you owe more than your home is worth, selling is more challenging—but not impossible. In these cases, a short sale may be your best option.
Best Selling Option: Short Sale
A short sale allows you to sell your home for less than the mortgage balance, with your lender’s approval. While you won’t walk away debt-free, this option can help you avoid foreclosure and limit the damage to your credit.
Tips for Short Sales:
Partner with a real estate agent who specializes in short sales.
Prepare documentation that shows financial hardship (job loss, medical bills, income loss, etc.).
Expect delays: lenders take time to review and approve short sale offers. Patience is key.
Credit Impact: Short Sale vs. Foreclosure
Falling behind on payments has a direct impact on your credit. Most lenders report delinquencies to credit bureaus once payments are 30+ days late, and foreclosure typically begins after about 120 days of nonpayment.
Foreclosure: Can drop your credit score by 100–160 points and stays on your record for up to 7 years.
Short Sale: Usually less damaging. Some lenders may even report it as “settled” or “paid as agreed.”
While both options hurt your credit, a short sale generally affects it less severely than foreclosure, making it the more favorable path if available.
How Missed Payments Affect Your Home Sale Proceeds
When selling behind on payments, your lender deducts missed payments, late fees, and penalties directly from the sale proceeds.
Example: If you sell for $250,000 and owe $200,000, but you’ve accumulated $8,000 in missed payments and fees, you’ll walk away with $42,000 minus other closing costs. A seller net sheet can help you calculate this in advance.
Alternatives to Selling When Behind on Payments
Selling isn’t your only option. Depending on your financial situation, you might be able to keep your home.
Mortgage Forbearance: Temporarily pause or reduce payments while you recover from hardship.
Loan Modification: Adjust loan terms, interest rates, or extend repayment time to make payments affordable.
Refinancing: If you qualify, refinancing may lower monthly payments by locking in a better rate.
Renting Out Your Home: Rental income could help cover mortgage costs if you can manage tenants.
Bankruptcy: As a last resort, Chapter 13 or Chapter 7 bankruptcy may provide debt relief while allowing you to keep your home. Always consult a bankruptcy attorney first.
Should You Sell or Stay?
Deciding whether to sell depends on your unique financial goals:
If you want a fresh start, selling your house behind on mortgage payments may provide the clean break you need.
If you’d rather keep your home, explore loan modifications, mortgage forbearance, or refinancing before selling.
Our team specializes in helping homeowners in tough financial situations. If you’re behind on payments and weighing your options, we can connect you with experienced professionals who understand how to avoid foreclosure, manage underwater homes, or sell quickly for cash if needed.
