What To Do If You Can’t Make Your Mortgage

If you’re worried about missing a mortgage payment, you’re not alone: Nearly 3% of mortgages were in some stage of delinquency in October 2023, from borrowers just 30 days overdue to those facing foreclosure.

Falling behind on your home payments can be nerve-wracking, but you still have options, especially if you act early.

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Reach out to your mortgage servicer and discuss what options are available. They’ll likely want to know what your finances look like and whether the issue is temporary or long-term, according to the Consumer Finance Protection Bureau (CFPB), so have documentation handy.

You might also want to connect with a housing counselor approved by the Department of Housing and Urban Development. They’ll be able to offer no-cost advice and may suggest options your servicer doesn’t.

Take a hard look at your finances to see if there’s any spending you can direct toward your mortgage payments. If you can’t make cuts, you might consider renting a part of your home or even taking out a personal loan. 

Budgeting apps are a great way to get a clear view of your expenses: PocketGuard analyzes your spending, lets you set savings goals and notifies you if you’re about to go over budget. It also has a bill payment tracker and bill negotiation feature.

The You Need A Budget (YNAB) app lets users assign a category to every dollar that comes in. YNAB says new customers save an average of $600 in the first two months and $6,000 in the first year.

Your servicer may agree to temporarily pause or reduce payments while you get your finances in order. A mortgage forbearance agreement lays out the terms of this arrangement, including how much time you’ll have to bring your payments current.

As part of the agreement, a lender agrees to hold off foreclosure proceedings.

Forbearance periods can last up to 18 months, according to the CFPB, which can help with a short-term setback like a job loss or medical emergency. It’s not a permanent solution, though, and your credit score may still take a hit.  

While forbearance offers a temporary respite, modification can change the terms of your loan, the interest rate you pay or both. Borrowers typically request loan modification after a forbearance period, according to the CFPB, so you’ll have to prove you’re not at risk of defaulting again.

You’ll also need to provide pay stubs, bank statements, tax returns and other financial documents, as well as a hardship letter explaining your circumstances.

According to Fannie Mae, borrowers may also request a modification if they’ve repeatedly been denied refinancing.  If your loan is at least 115% of the value of your home, you may qualify for the Principal Reduction Alternative program, which can lower your monthly payment and interest rate.

Like forbearance, loan modifications are reported to credit agencies and may affect your credit score. 

If your forbearance period is ending, your mortgage servicer might allow you to break up the missed payments into smaller amounts and repay them over months, rather than all at once.  Unlike a loan modification, the terms and interest rate wouldn’t change.

This type of mortgage relief is available to borrowers after they’ve missed a payment or more, according to Fannie Mae. Fannie Mae’s mortgage repayment calculator shows you what your repayment plan could look like. 

If you can refinance your home loan to a lower interest rate, it may lower your monthly payments.

The largest mortgage lender in the U.S., Rocket Mortgage considers applicants with credit scores as low as 580 and offers no-closing-cost refinances. In 2023, J.D. Power ranked Rocket number one for client satisfaction for the ninth year in a row.

While Rocket is entirely online, PNC Bank has branches in 23 states. In addition to cash-out refinancing, PNC offers conventional, government-backed and jumbo loans and borrowers can refinance their second home or investment properties.

If other options aren’t available, you may need to sell your home and either downsize or rent to keep your financial woes from compounding.

In a short sale, you would sell the house for less than what remains on the mortgage. If your lender agrees, they would forgive the remainder of the loan.  

A short sale can significantly impact your credit score, but it might be the best choice if you can’t wait for a good offer or if your mortgage is underwater. 

Although you’d have to give up your house, a deed in lieu agreement enables you to avoid foreclosure, which can knock your credit score down by more than 100 points and make it difficult to buy another home.

In exchange for surrendering the property, your lender would forgive the remainder of your mortgage, according to the CFPB. Some borrowers request a deed-in-lieu agreement when their mortgage is underwater. 

You’ll lose any existing equity on the property and may have to pay tax on the forgiven loan balance.

If you’re worried you won’t be able to make your mortgage payments — or you are already behind — reach out to your mortgage servicer to discuss your options. Some may require you to surrender your home, but you would still avoid the stress and financial damage of a foreclosure.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every mortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of mortgage products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.

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