What to Do If You're Struggling to Keep Up With Your Mortgage Payments
If you’re having trouble paying your mortgage, programs are available to help homeowners in situations like yours keep their houses or avoid foreclosure. Don’t wait to ask for help.
Talk to Your Loan Servicer and a Housing Counselor
If you can’t pay your mortgage on time, contact your loan servicer. Explain the reason for the problem and whether you expect it to be resolved soon, or whether it’s permanent, so that the lender can offer options to help.
You can also seek guidance from a housing counselor approved by the Department of Housing and Urban Development (HUD). He or she can tell you if you qualify for a government assistance program, help you choose the best option offered by your mortgage servicer, make a budget and resolve credit card debt or other financial problems that are making it difficult for you to afford your mortgage.
Options to Get Back on Track
You might be able to refinance your mortgage by taking on a new loan with a lower interest rate or switching from an adjustable to a fixed rate. You could also modify the terms of your existing loan by lowering the interest rate. A loan modification may be temporary, but refinancing permanently changes the terms of the loan. Your credit score and amount of equity will affect your options.
Your lender might offer you a repayment plan so that you can postpone payments in exchange for making higher payments later. Before you agree to a repayment plan, be sure you understand the terms and can meet them.
If you have suffered a hardship, such as a job loss, a natural disaster, or an illness or injury that prevents you from working, your lender may offer you forbearance. You might be able to make lower payments or skip your payments for a period of time until your financial situation improves.
Ways to Avoid Foreclosure
If you’re in dire straits, you might be able to walk away from your home and avoid foreclosure through a short sale. Your loan servicer could agree to sell the house and accept the price received, even if it’s less than the amount you owe. In some states, the loan servicer can sue the homeowner for the difference between the amount of money received in a short sale and the amount owed (the deficiency), unless the homeowner obtains a written waiver of deficiency. Check your state’s law before you agree to a short sale.
Another option is a deed-in-lieu of foreclosure, in which you turn over your house to the lender to avoid foreclosure and damage to your credit score. If you would be held responsible for a deficiency in your state, request a written waiver. You might qualify for help with relocation expenses.
Ask for Help
If you’re struggling to pay your mortgage, your situation may seem bleak, but you have options. The first step is to contact your loan servicer and be honest about your situation so that your lender can help you find a solution.
This article is intended for informational purposes only and should not be construed as professional or legal advice.
Jennifer Dion, Realtor