Millions of Americans have dealt with this problem, and while it seems like a hopeless situation, there are solutions. Many of these solutions, as it turns out, are easier than you might have thought!
Remember, You are Not the First Person to Struggle with Mortgage Payments
When you are struggling to make mortgage payments, it can make you feel irresponsible and unaccountable. You feel like you have failed. And this failure, it seems, is reflection of your work ethic and trustworthiness. These thoughts are just plain false.
It’s important to remember that you are not the first person, nor will you be the last, to struggle with mortgage payments. According to a 2016 study completed by the MacArthur Foundation and Hart Research Associates, over half of people say they have made sacrifices in order to cover their rent or mortgage payments. Three out of every ten respondents said they spend more than 30% of their income on housing, and roughly 1/3 know someone who has experienced an eviction or foreclosure.
These struggles have been heightened in 2020. According to a report from USA Today, about 6 million people missed rent or mortgage payments in the month of September. Another report says that half of U.S. homeowners struggle with mortgage payments because of COVID-19.
You should not be hard on yourself. There are many people struggling with payments, and you are not alone in your financial challenges. Keep this in mind, maintain a positive attitude, and make direct, positive changes.
Here are some ways to improve your financial situation…
What to Do If You are Struggling With Mortgage Payments
Step One: Call your Mortgage Provider
Before you do anything else, contact the mortgage servicer to explain your situation and seek guidance on the best solutions. Be honest and upfront with them and you should receive clear advice on what options are available to remedy the situation.
Explain why you are unable to make payments, and discuss if this is a temporary issue or if it appears to be a permanent problem. You should also provide details about your current income and expenses so the mortgage servicer can provide specific advice.
Lenders, agents, and mortgage providers want you to avoid foreclosure, not just for ethical reasons, but because a foreclosure hurts them financially as well. Therefore, many organizations have programs in place to help you avoid missing payments. After reviewing your situation, your servicer may be able to provide good advice and resources, including housing counselors.
Talk to a Housing Counselor
Some organizations, including the Department of Housing and Urban Development, provide housing counselors who can help guide you through the issue. If you are struggling with mortgage payments, counselors can discuss your situation, help identify solutions, and guide you through the process.
At little to no cost, they may also be able to provide assistance with budgeting, debt reduction, and financial problems that caused missed mortgage payments.
Learn About Refinancing Options
If you are intent on keeping your home, one of the most common solutions is refinancing. By refinancing your mortgage, you may be able to reduce the monthly payments and gain control of your monthly budget.
In most cases, this means extending the length of time on your loan. Suppose you have a balance of $400,000, with 20 years of payments left on the loan. If you were to refinance and extend it back to a 30-year mortgage, you could significantly reduce the monthly amount. Refinancing can also reduce interest rates, which could, if the reduction is large enough, significantly lower your monthly payment.
Move into a More Affordable Home
This is a big step, but in the long run it may be your best option. If you are having trouble making payments on your mortgage, the simple reason might be that your home is too expensive. It may be ideal to sell your current home and move into a house that is easier on your bank account.
When moving, you can either rent or buy a new house. Renting can have advantages, as it provides a short-term ease on your budget. Renting for a year or two could help you establish a strong financial foundation, while purchasing a more affordable house can help you remain a homeowner while improving your monthly finances.
Discuss Forbearance Options
If your current financial situation is temporary, forbearance may provide a solution to your problems. Forbearance is simply a pause in your mortgage payments, and it could give the temporary relief you need for better results.
Many lenders and mortgage servicers offer a path to forbearance, and with the current economic situation, many people are using this option. So if you have been laid off or work in a business that has been ordered to shutdown by state or local governments, talk to your lender about forbearance.
In Extreme Cases, Consider a Short Sale
If all other options won’t work, consider a short sale on your home. In real estate, a short sale is when a homeowner sells their property for less than the amount due on the mortgage. All proceeds from the sale go to the lender and, in most cases, the mortgage is completely forgiven. (In some areas, the mortgage must be entirely forgiven.)
A short sale is a lengthy, complex process, and you will lose any equity you may have gained in the home. However, it is far better than a foreclosure, both for your personal finances and your credit rating.
This is an extreme measure that should only be considered if you have no other option. But in many cases it can provide the financial relief you need, helping you move on from a home that you can no longer afford.
Providing Mortgage Support for San Diego and the Surrounding Area
If you need help finding an affordable mortgage, or want to refinance your current loan into a more manageable total, we can help.
Contact our friendly staff today and put our common-sense approach to mortgage underwriting to work for you. From investors to first-home buyers, we are here to provide the mortgage service you deserve!
“We’re loving our new place and we’re very pleased with how smoothly everything went through closing. Thanks for keeping us up to date on the possibility of refinancing at a lower rate; we trust your judgement as far as waiting until the rate is around 5% lower before we refinance. We’re very interested in pursuing that if rates drop to that level. Thanks so much for all your help and personal attention!”
“Chad, it was a pleasure working with you. Your loan was smooth, speedy, and we were kept well informed. I will make sure to prioritize offers where you are the loan officer as I know they run smoothly.”
A very responsible and experienced professional with his highly effective team
I really enjoyed working with Chad Baker and the rest of the team. This was our first time buying a home in California and we started with unnecessary assumptions based on our previous experience as home-owners in a different state. Chad and his team were available throughout the whole process, explaining the state differences, answering all our phone calls and emails quickly and directly, and providing detailed weekly status reports so that all parties including agents knew exactly where we were in the process. Chad was very experienced and provided customized loan products for us to consider, which definitely facilitated our transaction. I recommend the Chad Baker team! ”