Financial hardships can strike when we least expect them. Maybe you’ve been part of a downsizing at work, a catastrophic illness has wiped out your savings, or you’re facing any number of other financial challenges. For any kind of financial hardship, there are multiple options to help you get back on track.

I’ve missed one or more payments. What should I do?

As soon as—or, better, before—you miss a payment, contact your mortgage servicer. The company may offer mortgage-relief options that could help you stay in your home. Be sure to ask how each of these options will affect your credit score.

What are my options?

Ask your mortgage servicer about the mortgage relief options that may be available to you based on your situation, including:

• Forbearance. Temporarily pause or reduce your monthly payments for anywhere from one month to a year, but interest accrues; then, repay on an agreed-upon schedule or at the end of your loan.
• Deferment. If you qualify, move missed payments to the end of the loan or repay them under another approved arrangement, depending on their circumstances and the type of mortgage you have.
• Loan modification. Reduce the interest rate, extend the loan term or add past-due amounts to the loan balance. These changes would be permanent for the life of your loan.
• Reinstatement. If your hardship was temporary and you have the funds, you can arrange to pay the entire past-due amount, including late fees.
• Repayment plan. If your hardship was temporary, your servicer may allow you to repay the missed payments over time by adding a portion of the past-due amount to your regular monthly payment.

If interest rates are favorable compared to your current rate, you might also be able to refinance your mortgage to lower your monthly mortgage payments.

What if I can’t pay back the missed payments?

If your hardship is longer term, options can include:  Contact your Lender first and foremost!

• Selling your home. You can sell if you have the equity to pay off the loan.
• Initiating a short sale. If your mortgage balance is more than the current market value of your home, you may be able to do a short sale and have the lender forgive or defer payment on the difference. To avoid having a debt collector come back to you later, you’ll need to obtain a written deficiency waiver from the lender. Note, however, that cancelled debt must be reported to the IRS and is considered taxable income.  Short Sales normally affect your credit for approx 3 years
• Foreclosure. The lender can force the sale of your home to recover the debt. Foreclosure processes differ by state, but generally a lender can initiate a foreclosure after you miss four payments or are 120 days behind on your mortgage.  Foreclosures normally affect your credit for approx 7 years.
• Deed-in-lieu of foreclosure. You can voluntarily transfer the title of your home to your lender in exchange for cancellation of the rest of your mortgage debt.

What if my hardship is due to a natural disaster?

If your home or finances have been affected by a federally declared disaster, additional mortgage relief may be available. Depending on the type of mortgage you have, your mortgage servicer may offer options such as temporary payment relief, payment deferrals or other forms of assistance. Contact your mortgage servicer as soon as possible to discuss your situation and ask what disaster relief programs may be available.

Where else can I turn to for assistance?

• A REALTOR®, a member of the National Association of REALTORS®, can help you identify local resources, such as reputable attorneys and short-sale negotiators. NAR members who hold the Short Sales and Foreclosure Resource Certification have special training to help you through a difficult sale.
• State-run mortgage relief programs or nonprofit organizations may provide emergency housing support. Some homeowners associations also help with fees or mediation.
• A HUD-certified housing counselor can also help you understand your options and communicate with your mortgage servicer.

Be wary of mortgage-relief scams!

Scammers prey on vulnerable homeowners by promising to get you modifications on your loan or help you avoid foreclosure. Never pay a company or organization upfront for mortgage-relief help.