Not enough money!
So you’ve worked through your budget. You cut expenses. You can track all your money coming in and going out. All your bills are on the perfect schedule. But you still don’t have enough money to pay your mortgage. This is all too common today. With adjustable rate mortgages, a mortgage payment you could afford two years ago might now be too much because the interest rate jumped. Property values have been skyrocketing all over the country which has led to ballooning personal property taxes. Since you can’t pay your mortgage principal and interest without also paying your taxes, you can find yourself unable to afford the whole payment. In areas with huge growth, many families have seen 50% or more of their total mortgage payment going to pay taxes.
This is before we get to issues like job loss, income reductions, stagnant wages, and the cost of living outpacing income. Many Americans simply aren’t making enough money. Since the 2007 Recession, those who lost their jobs eventually found work, but their pay was greatly reduced. Their paychecks never recovered. Plenty of people have seen 1% or less for pay increases each year, since the Recession, so they have fallen further and further behind. Of course, being behind on your mortgage payment could be a combination of several of these things.
Programs to help
First, contact your mortgage holder. Depending on your credit score, you may be able to refinance your mortgage, lower the rate, and lower the payment. With the refinance, they will roll up past due amounts into the refinanced loan, so you can start fresh.
If that isn’t an option, your mortgage holder can help you apply for their mortgage assistance programs. Some programs are internal to the bank. Others are government sponsored programs.
Internal bank programs can do things like defer your mortgage payment for a month or two to help you catch up. They can move your past due payments to the end of the loan period, so you can get current. These kinds of options are perfect if you are behind because you had a problem paying your mortgage, but now you can afford it or will be able to afford it in a month.
If your situation is permanent, and you cannot afford your mortgage payment, your lender will help you apply for a loan modification. This typically involves some sort of government assistance. The bank will collect a lot of information from you. The first piece of that is your detailed budget, which is why it is useful to already have this step done! They want to know how much money your make, what your expenses are, and depending on the difference, they will know what mortgage payment you could afford. They will also get pay stubs from you for proof of income, copies of your federal income tax paperwork, and proof you still reside in the house, like a current water bill. They typically have proprietary forms to complete and some release forms.
The process takes several weeks, but while you’re in it, the lender will postpone any loan default or foreclosure actions, so you don’t have to worry.
If you’re approved, your mortgage loan will be changed to reflect the new terms they put in place to get your mortgage payment to a dollar amount you can afford. For example, they may drop your APR to 2% from 7%. Modified loans have a probationary period to make sure you pay on time. Once you do that for the specified period, usually several months, your loan modification becomes permanent. Celebrate, now you can afford all your monthly expenses!
But what if your application is declined? Next time, what you should do if your loan modification request is rejected!