How to get help with your mortgage payments

No one who buys a house expects they won’t be able to make the payments in the future. But life has a habit of sending us curveballs we don’t expect. Being in financial trouble doesn’t have to mean resigning yourself to foreclosure. We’ll cover how to get help with mortgage payments and move forward on better financial footing.

Your options for help, at a glance

Lenders and the servicers who manage monthly mortgage payments for them don’t want to manage a portfolio of foreclosed properties. The preferred outcome is for you to stay in your home. But if the best way to stabilize your financial situation is a new living arrangement, there are options for a graceful exit.

Some options may affect your credit, especially if you are already experiencing delinquency, but the impact varies. Ask your servicer how the option will be reported. Here’s a quick look with links to individual sections on each topic.

Beware of mortgage scams

“It’s important to speak to your mortgage servicer or a certified housing counselor to make sure you’re getting legitimate help options presented to you. We’ll have more in a minute, but the Department of Housing and Urban Development (HUD) can be a good resource in this area.²

If you find yourself in financial distress and in danger of losing your home, it’s understandable that you may be desperate for help to avoid foreclosure. The impulse may be to take relief anywhere you can find it. Unfortunately, people with bad intentions attempt to prey on your vulnerability to conduct mortgage scams.

Because foreclosures are often put up for sale in public auctions, advertisements of those sale dates will appear in advance. However, this also creates the opportunity for someone looking to take advantage of the situation.

While these may take many forms, here are a couple of the most common:

• Equity stripping: Equity stripping is when a scammer purporting to be able to help you avoid foreclosure gets an unsuspecting homeowner to sign their deed over to the scammer. At that point, the scammer then refinances the property, keeping the equity difference. The homeowner is charged rent and may soon end up facing foreclosure again anyway.
• Loan modification scams: In other scenarios, people may represent themselves as government representatives or lawyers who will negotiate to avoid foreclosure on your behalf. They do this in exchange for an upfront fee. To the extent you end up with new terms at all, these are often unfavorable.

If you suspect a mortgage scam, you should report it to the following authorities:

• Consumer Financial Protection Bureau
• Federal Trade Commission
• HUD Office of Inspector General
• Your state’s attorney general

Who to contact to get help with mortgage payments

Perhaps the best way to avoid scams is to know where to get legitimate help with housing payment assistance. We recommend reaching out to your mortgage servicer, the entity you make your payment to, as soon as possible. If you want a third-party opinion, HUD has housing counselors.²

Rocket Mortgage is here for you

If your servicer is Rocket Mortgage, we recommend you contact us at the first sign you may fall behind on your mortgage payment. That way, we’ll be able to go over your situation and look over the options that may be available to you. Here’s how you can reach out

1. Sign in to your Rocket Account.
2. From there, you’ll find a Payment assistance option under the Help menu.
3. Be prepared to share information about the nature of your hardship along with financial documentation so we can properly evaluate your situation.

HUD counselors and housing support

Your servicer will be able to go over the options available to you, but we can understand that some want to talk with a third party who can give them an opinion.

HUD has housing counselors available. As part of the assistance process, they review your budget and create a plan to get you back on track. Plus, they explore options available based on the type of loan you have. Which option you can use is ultimately up to your servicer, but HUD counselors are dedicated to helping you be prepared for what your servicer will want.

You can get in touch with a HUD counselor via search or at 800-569-4287. The Office of the Comptroller of the Currency also has some excellent resources on its foreclosure prevention page.

Options to remain in your home

The first thing any servicer is going to do is determine if there’s a way they can help you stay in your home while getting your financial feet under you.

Refinancing

Before we get into ways your servicer can help if you’re behind on your payments, let’s discuss an avenue you can look at to better set yourself up for the future if potential trouble hasn’t arrived yet.

Refinancing is taking on a new loan with different terms than your existing one. You might refinance to a lower rate or longer term in order to give yourself more room in the monthly budget. You might do a cash-out refinance to cost-effectively pay for much-needed maintenance or to consolidate high-interest debt.

To qualify to refinance, you really want to look into this prior to missing any payments. Think of this as the most proactive option you can consider.

*Rocket Mortgage doesn’t offer USDA loans at this time.

Reinstatement

Mortgage reinstatement is when you bring your mortgage current by paying back all of your past-due amounts in a single lump sum. While this doesn’t work for everyone, it’s the fastest way to get back on track if an employer comes through with promised backpay, for example.

Get a reinstatement quote from your servicer to have an accurate accounting of what you owe

Repayment plan

The second option you may have at this preforeclosure stage is a mortgage repayment plan. If you work out an agreement with your servicer, when you’re ready to resume payments, some of your past-due amount is added to your mortgage payment each month until you’re back payments are fully satisfied.

These are generally short-term, lasting 3 – 6 months.

Forbearance

Forbearance is a temporary pause or reduction of your monthly mortgage payment. The idea is to give you some breathing room while you get your finances in order.

When you’re ready to resume your mortgage payment, you do have to pay back any payments you missed. Paying whatever you can during forbearance will reduce what you owe at the end. Your servicer will go over your options, which may include reinstatement, a repayment plan, or another loss mitigation alternative below.

Loan modification

A loan modification involves changing the terms of an existing loan to add past-due payments back into the balance to be paid back over time. Your mortgage rate will likely change and your term may be extended.

This is different than a refinance, which is an entirely new loan. It’s also only available to those in default on their mortgage.

Payment deferral

The last option is a payment deferral. Depending on the type of loan you have, it may actually be a partial claim. Although the technical details differ, they have the same practical effect for borrowers in that they move a number of payments to the back of your loan, to be dealt with when your home is sold, refinanced, or otherwise paid off.

The only practical difference between the two is that in a partial claim, past-due payments that are deferred become a secondary lien on the home. How many payments can be deferred depends on the type of mortgage you have. Speak with your servicer.

Options for a graceful exit

If it’s not financially feasible for you to stay in your home, there are options allowing you to move on while avoiding the monetary and some of the credit pain of a foreclosure.

Traditional home sale

Your best option if you can no longer afford your payment is to sell the home to pay off the mortgage. You can then take any leftover money and put it toward a down payment on a new home within your budget or use it for a deposit on a rental.

This is the best option for moving on because there’s no negative impact to your credit. A listing agent, like those from our friends at Redfin¹, can help you price your home correctly and negotiate the best deal for you as the seller.

Short sale

What happens if you can’t afford your mortgage, but your property value has also dropped to the point where you owe more on the home than it’s worth? In this case, your servicer may approve a short sale.

In a short sale, your servicer manages the entire process of taking and approving offers on your home. In exchange for keeping up the property during the sale process, you may be offered a cash incentive by your servicer. If you choose, this can be used to fund your next place.

One cautionary note is to communicate with your servicer about exactly what you may still be responsible for. In some states, lenders can pursue a deficiency judgment for the difference between what the home sells for and the balance of what you owe on the mortgage. This can be waived, but it doesn’t have to be.

One other reason a short sale is preferable to a foreclosure is that you may be able to get a mortgage sooner. In fact, FHA loans have no waiting period If you meet the following conditions:

• No mortgage or installment payments 30 or more days late in the year leading up to your application.
• No mortgage or installment payments 30 or more days late in the 12 months prior to the short sale.

Deed in lieu of foreclosure

In a deed in lieu of foreclosure, your servicer agrees to let you turn over your house deed to the lender and just walk away. For example, this may be approved if your circumstances make it impractical to remain in the home while waiting for a sale.

You should know this involves a 2 – 7-year wait to get another mortgage, depending on the loan you apply for. Similar guidelines in terms of cash incentives for keeping up the home and deficiency rights for the lender also apply.

Assess your financial situation

Before contacting your servicer, be aware of where you stand financially. The reality is that most help your servicer can offer will typically come with a negative impact to your credit score, with the exception of natural disaster aftermath, because you haven’t been able to pay your loan according to the terms of the contract.

With this in mind, you should prioritize your mortgage. Look for areas in your budget where you can cut discretionary spending. But you should feel comfortable reaching out for help if you need it. Your credit score will go up over time with proper habits, and the impact is less than that of a foreclosure.

The bottom line: You can get help with mortgage payments

Life is highly unpredictable. While your mortgage payment is a financial priority, we understand there may be times when you struggle to make it due to hardship. If you do find yourself having a hard time, there are relief options to stay in your home or move on to your next living arrangement if you have to.

We sincerely hope you don’t ever have to put the advice in this article into practice, but if you do, the most important place to start is with your servicer. Rocket Mortgage clients can reach out to us by visiting the Mortgage tab in their Rocket Account and navigating to Help >Payment assistance.

¹ Rocket Mortgage is an affiliate of Redfin. You aren't required to use its lending services. Learn more at redfin.com/afba.