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. 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 a better financial footing.

Your options for help, at a glance

Lenders and the servicers managing your mortgage payment don't get into the business to sell homes they have to take back. It’s better for them if you stay in your home. But if it puts you in a better situation financially to exit the home gracefully, they can help you with that, too.

In most cases, these options are going to have a negative impact on your credit score. But it’s not as bad as a foreclosure, and certainly something you can recover from if you get current again and maintain good habits. There are exceptions to credit reporting if the assistance you receive is the result of a declared natural disaster.

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 to avoid foreclosure. You would take relief anywhere you could find it. Unfortunately, people with bad intentions often 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 claiming to be able to help you avoid foreclosure gets you to sign their deed over to them. At that point, they then refinance the property, keeping the equity difference. You get 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

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. There may also be state-specific resources you can look into.

Rocket Mortgage is here for you

If your servicer is Rocket Mortgage, we recommend you contact us at the first sign that 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 of the Mortgage tab.
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 it's understandable if you want to talk with a third party who can give 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 go over options available based on the type of loan you have.

Which option you qualify for is ultimately up to your servicer, but HUD counselors can help educate and better prepare you.

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.

State-based resources

States may have resources available through housing finance agencies or their own consumer assistance agencies. HUD maintains a state resource directory as well.

Before accepting any assistance, be clear about what it will and won’t cover. It’s not just the loan coverage to consider, but also property taxes, homeowners insurance, and homeowners association (HOA) dues.

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 should look into this prior to missing any payments. Other options are reactive; this is proactive.

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 back pay, for example.

Get a reinstatement quote from your servicer to know exactly 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 your 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. It's intended to provide financial assistance during a short-term financial hardship.

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.

Graceful exit strategies from your mortgage

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.

Sell your home

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 Redfin, can help you price your home correctly and negotiate the best deal for you as the seller.⁷

Short sale

A short sale occurs when your home is sold for less than what you owe on your mortgage. Servicers will sometimes approve these if you can show a hardship in times of declining property values in your area.

Although there is a negative impact on your credit, a short sale is preferable to a foreclosure. In fact, if you keep up with your mortgage and installment payments in the year leading up to the short sale and the year prior to your application for a new mortgage, there’s no waiting period to get an FHA loan.

One thing to watch out for with this and the deed in lieu that we discussed next is that lenders may be able to go after you for a deficiency judgment equal to the difference between the sale price and what you owe on the mortgage. State rules will vary. Your lender may choose to waive this, but get it in writing.

On the other hand, servicers may also be able to give you a cash incentive. This could be used toward getting your next place.

Deed in lieu of foreclosure

A deed in lieu of foreclosure occurs when you give up your property to a mortgage lender voluntarily prior to going through a full foreclosure process. The credit impact may be comparable to a foreclosure, but servicers will sometimes give payments toward your next living arrangement.

Remember that in certain states, lenders may be able to pursue a deficiency judgment. In these states, you can ask your lender about their intentions.

The bottom line: Assistance is available

If you’re having trouble with your mortgage payment, reach out to your mortgage servicer proactively. Although relief often comes with temporary negative credit impacts, it’s preferable to foreclosure. Use the time to get back on your feet.

Rocket Mortgage clients experiencing payment trouble should sign in to their Rocket Account. Under the Mortgage tab, go to Help > Payment assistance. You're not alone.

¹ Refinancing may increase finance charges over the life of the loan.

² Rocket Mortgage is not acting on behalf of FHA or HUD.

³ The FHA Streamline program may have stricter requirements in some states. In order to qualify for the FHA Streamline program, an immediate .5% minimum reduction in interest and mortgage insurance premium is required. Some states may require an appraisal.

⁴ To qualify for this offer, you must meet all standard FHA eligibility requirements. In addition, your total mortgage payment, including taxes and insurance, cannot exceed 38% of your income, your debt-to-income (DTI) ratio cannot exceed 45%, and you must have 12 months of verifiable housing history immediately prior to your application, no late payments 30 days or greater in the last 12-months, and no derogatory marks on your credit report. Not available on jumbo loans. Asset statements may be needed, no more than 1 day of non-sufficient fund fees are allowed in the most recent 2 months prior to application. Additional restrictions/conditions may apply.

⁵ The VA Streamline program may have stricter requirements in some states. In order to qualify for the VA Streamline program, you must have a VA loan. The VA Streamline is only available on primary residences. Cash-out transactions are not allowed. In order to qualify for a VA Streamline, a 0.5% minimum reduction in interest rate on the previous fixed-rate loan must occur if the new loan will be a fixed rate or a 2% minimum reduction in interest rate on previous adjustable rate mortgage loan must occur; a minimum of 6 months of consecutive mortgage payments must be paid on the current loan at the time of application. Some states may require an appraisal. Additional restrictions/conditions may apply.

⁶ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency. 

⁷ Rocket Mortgage is an affiliate of Redfin. You aren't required to use its lending services. Learn more at redfin.com/afba.

This article is for informational purposes only and is not intended to provide, and should not be relied on for, medical, legal, financial, investment, or tax advice. You should consult with a qualified professional for advice specific to your situation. Consumers should independently verify that any services, products, or programs referenced meet their needs and comply with applicable requirements.

Rocket Mortgage and Redfin are trademarks or service marks of Rocket Mortgage LLC or its affiliates.