Need Mortgage Help? Here Are Your Options

When a homeowner moves into their new home, financial hardship is likely the furthest thing from their mind. But life happens fast. Although we hope it doesn’t happen, if you need help with mortgage payments, taking prompt action will offer you the most avenues for assistance.

If you’re struggling financially, you don’t have to face your problems alone. If you think you might need mortgage relief, you should contact your mortgage servicer as soon as you think you might have an issue. There may be several options your servicer can evaluate you for, but the earlier you contact them, the better you give yourself the best chance to stay in your home.

Your mortgage servicer is the entity you make your payment to. It may or may not be the lender that originated in your loan.

Aside from limited situations like natural disasters, mortgage relief options typically have a negative impact on your credit. However, the impact of relief options is often less than if you had a foreclosure on your record, and you may be able to stay in your home. Moreover, the credit impact will lessen over time if you maintain good habits after getting current with your payments.

Rocket Mortgage^® clients can request help by filling out our Application for Success. You’ll have the opportunity to tell us about the nature of the trouble and share documentation regarding your financial circumstances. From there, we’ll be able to go over options with you. After all, we’re here to help.

Refinance

One thing you can do before you miss any payments to set yourself up for success in the future is to refinance. Refinancing can lower your payment with a new interest rate or loan term. However, a mortgage refinance involves getting a brand-new loan. VA and FHA loans have their own types of refinancing that may offer an option with no appraisal and less paperwork.

• VA Streamline Refinance: If you’re struggling to pay your existing VA loan, you can refinance at a lower rate with a VA Interest Rate Reduction Refinance Loan (IRRRL). One thing to keep in mind is that the VA has a net tangible benefits test. They want you to be able to see significant benefits in terms of rate and payment before you can do a streamline loan. In addition, you have to make at least 6 months’ worth of payments on your existing loan and at least 212 days must pass between the closing date of your existing loan and the closing of the new one.

• FHA Streamline: Consider this method to refinance if you have an FHA loan. If you haven’t had any mortgage payments more than 30 days late in the last 6 months or haven’t made more than one payment more than 30 days late in the past year, an FHA Streamline may work for you. The FHA does have similar rules to VA Streamlines in terms of client benefits. Without an appraisal, your term can’t be extended beyond 30 years or more than 12 years when compared to your previous term.
• Conventional refinance: A conventional refinance is for those who don’t have a government-backed loan. These usually require full appraisals and documentation, but they can be used to lower your rate, change your term or even better your financial situation by converting equity into cash to consolidate debt.

HUD Housing Support

Although all mortgage servicers wish to help, it’s understandable if you find yourself nervous or you want options outside of your mortgage services. There are other resources available to you.

The U.S. Department of Housing and Urban Development (HUD) offers several resources to help with mortgage payments. The Homeowner’s HOPE hotline, which can be reached at (888) 995-HOPE, has mortgage counselors to help answer your questions about payment assistance. To find local housing counseling agencies, you can call (800) 596-4287.

HUD-approved housing counseling services will be able to go over various options your servicer might be able to qualify you for. Depending on the circumstances surrounding your hardship, they may also be able to connect you with homeowner assistance funds that may be available.

Forbearance

The first option that servicers can use to provide you with relief during a hardship is forbearance. Forbearance refers to a temporary pause or reduction of your monthly mortgage payment. No new late fees are charged by Rocket Mortgage when you’re on forbearance. Your lender will advance your property tax and insurance payments if you have an escrow account.

You have the option of paying whatever you can afford to reduce the amount you’ll have to make up later. Every situation is different, so the maximum length of any forbearance will vary, but the longer you’re on it, the more payments you’ll have to make up.

Reinstatement

If you have missed payments in the past and are in a situation where you can make them moving forward, the fastest way to get your mortgage back on track is by reinstating your loan. Mortgage reinstatement is a one-time lump sum payment of the full past-due amount, along with any late fees and other advances paid on your behalf by your mortgage servicer.

With a one-time transaction, the loan does not go any further into delinquency and negative credit impact ceases as long as the mortgage is continued to be paid on time.

One scenario in which this could come into play is if you’ve been working for a while without a paycheck and finally receive promised backpay. This money could also come from a large tax refund, bonus at work or a helping hand from a friend, family member or other source.

This option is unlikely for borrowers experiencing financial difficulty or currently going through a mortgage hardship that makes it difficult to make their payment now and in the future. If you’re in the midst of financial hardship, the following options may be better suited for you.

Repayment Plan

A repayment plan involves adding a portion of your past-due payments back into your monthly payment until you’ve made up your back payments. While everyone is evaluated individually, these are usually short-term, lasting 3 – 6 months.

Payment Deferral

In certain situations, you may qualify for a payment deferral. When you qualify, you just pick up your payments where you left off after your hardship has ended. Your missed payments are deferred and due when you sell your home, after you refinance, when your loan matures or you otherwise pay off your loan. This is also referred to as a partial claim on FHA loans.

Loan Modification

Loan modification involves changing the terms of your loan in order to add your missed payments back into your loan balance. Your rate may change and your term may be extended. However, it’s different than a refinance. There is a negative impact on your credit in the majority of cases.

As with all of these options, your lender will evaluate you for this based on your financial situation and the nature of your hardship.

Although in many cases it may be desirable, not everyone may have the ability or desire to stay in their home after considering all the options for dealing with their payment trouble. It’s understandable. Here are a few options for moving on from your home that don’t involve foreclosure.

Traditional Home Sale

If you’ve decided staying in your home no longer makes financial sense, the best option is to move forward with a regular home sale. By putting your home on the market, you may find that you can pay off your existing mortgage while pocketing any remaining profits to be used toward finding your next living arrangement, whether renting or buying a more suitable home.

You might be in a situation where you don’t want your home to sit on the market for months, but you can’t afford to give someone a bargain either. Our friends at Rocket Homes^SM can match you with a real estate agent who can understand your goals and help you price competitively to attract the best offer in minimal time.¹

Short Sale

In a short sale, you work with your servicer to sell the property for less than your outstanding mortgage balance. If your servicer agrees to this, it will be because you’ve not only shown hardship, but your property value has dropped enough that you can’t pay off your existing mortgage through a normal sale. Your servicer has final authority to select the winning offer.

In going this route, you avoid foreclosure and your servicer avoids having to take over the property. You’ll want a real estate agent who is experienced in dealing with short sales. Servicers usually cover the costs associated with the sale.

In exchange for maintaining the property to the closing date, your servicer may be willing to give you some money toward finding your next living arrangements. Although there is a credit hit, if your score is high enough, you may be able to get another FHA loan with no waiting period as long as you don’t have a payment 30 days or more late in the 12 months prior to the short sale or your new mortgage application.

Deed In Lieu Of Foreclosure

A deed in lieu of foreclosure involves voluntarily giving the property back by signing over the property’s title. Again, your servicer or lender doesn’t automatically have to agree to this and you’ll have to show evidence of real struggle.

It should be noted that this option does have a credit impact similar to that of a foreclosure, at least in terms of the way lenders treat the waiting periods to get a new mortgage, with limited exceptions.

A deed in lieu should be a last resort. However, it’s a chance to avoid a drawn-out process and move forward. Again, your servicer or lender may give you something for relocation assistance.

No one ever anticipates having payment trouble when they get the keys to their new home, but life can get in the way of our best laid plans. Take a deep breath and contact your mortgage servicer. Rocket Mortgage clients can request help by filling out our Application for Success. You don’t have to face this alone.

¹ Rocket Homes^® is a registered trademark licensed to Rocket Homes Real Estate LLC. The Rocket Homes^SM Logo is a service mark licensed to Rocket Homes Real Estate LLC. Rocket Homes Real Estate LLC fully supports the principles of the Fair Housing Act. For Rocket Homes Real Estate LLC license numbers, visit  RocketHomes.com/license-numbers. California DRE #01804478. Hawaii License # RB-23371. TREC: Information about brokerage services, Consumer protection notice.