How to get help with your mortgage payments

When you move into your new home, financial hardship is likely the furthest thing from your mind. But life happens fast. Although we hope this is never the case, if you need help with mortgage payments, taking prompt action will give your servicer the best opportunity to assist you.     

While any mortgage relief could affect your credit, the options we’ll talk about are intended to help you avoid foreclosure. The idea is to find your financial footing and move forward.

Beware of scammers claiming to help you

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

One common scheme is someone posing as a government official or attorney offering to negotiate the terms of a loan modification to avoid foreclosure. They may charge fees up front and often fail to negotiate at all.

If you have a scam to report, you can do so with the following sources:

• Consumer Financial Protection Bureau
• Federal Trade Commission
• Department of Housing and Urban Development (HUD) Office of Inspector General
• Your state’s attorney general

If something sounds too good to be true, it probably is. But there is legitimate help available. 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, the Department of Housing and Urban Development has housing counselors.

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.

Your options for help, at a glance

If you’re looking for mortgage relief, here’s a quick table with different forms you may qualify for:

Be sure to work closely with your servicer because they’ll be able to give you mortgage help that best applies to your situation. Unlike scammers, there won’t be exorbitant fees involved.

Who to contact

Clients should contact their mortgage servicer as soon as possible. The faster you act to tell them about your struggles, the more options they may have to help you. This may or may not be the same entity that originated your mortgage.

Look for information on your servicer’s website about the best way to contact them. There will also likely be a contact phone number or email address on your monthly mortgage statements.

Rocket Mortgage^® is here for you

If you’re a Rocket Mortgage client experiencing payment trouble, we’re here to help. The best way to reach out to us is by signing into your Rocket Account. From there, navigate to the Mortgage tab. There, you can find a Help menu. Click Payment assistance.

Options to help you remain in your home

If you’re looking to remain in your home after a hardship, there are several avenues your servicer may look to qualify you for. You should know your servicer has final say on what relief you qualify for when they look over your situation.

Refinancing

If you’re not in payment trouble yet but want to better prepare yourself financially should something come up, you could look into refinancing. Refinancing involves taking on a new loan with different terms while paying off your previous mortgage.

Looking to shore up your financial situation? You might wish to lower your rate or change your term. You could also choose to access existing equity to consolidate debt. To give yourself the best chance of qualifying, you’ll want to look into this prior to missing any payments.

The following table shows refinancing options you might have to set yourself up on better financial footing. To help determine whether refinancing makes sense for you, you can check out our refinance calculator.

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

Reinstatement

Reinstatement involves bringing your loan current after one or several missed payments by paying back the amount owed in a single lump sum. Depending on the amount of payments missed, this may not be possible for some. But it does work for some situations, like an employer coming through with promised backpay.

While this is the fastest way to get back on track, be sure to get a reinstatement quote from your lender so that you know you’re paying the correct amount.

Repayment plan

A repayment plan is a short-term proposition to help you bring your loan back to current. Some of your past-due amount is added to your monthly mortgage payments until it’s paid off. These typically last 3 – 6 months but could be longer.

Forbearance

Forbearance is a form of loss mitigation with a temporary pause or reduction in your monthly mortgage payment. While this does provide relief, it’s meant to be short-term in nature because the longer the forbearance, the further you fall behind on payments. This can limit your options when it comes time to pay it back.

Loan modification

A loan modification involves changing the terms of an existing loan to add past-due payments back into the balance. 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 or partial claim

Deferrals and partial claims have similar impacts even if the technical details differ. A deferral involves moving payments to the backend of your loan to be paid off when the home is sold, refinanced, or your loan is otherwise paid off. A partial claim works the same way except your missed payments become a secondary lien on your home.

How many payments can be deferred varies heavily by the investor in your mortgage. Speak to your servicer.

HUD housing support

While it’s necessary to work with your servicer in looking at mortgage relief options, sometimes it helps to have the eyes of a third party who can go deep on your financial situation.

HUD makes housing counselors available. As part of this process, they can go into your budget and help you with a plan to get back on track as well as reviewing with you the options that may be available given the type of loan you have. It’s ultimately up to your servicer, but this could help you be prepared.

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

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.

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.