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Erika Rasure is globally-recognized as a leading consumer economics subject matter expert, researcher, and educator. She is a financial therapist and transformational coach, with a special interest in helping women learn how to invest.
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Feeling overwhelmed by your mortgage payment? It may be that the total cost of homeownership—from your house payments to utilities to insurance costs—wasn’t quite clear to you before you took the plunge. Or perhaps you suffered a job loss or an unexpected family medical emergency. No matter the reason, falling behind on your mortgage payments is always a scary prospect.
So, what do you do when you just can’t make ends meet? Before doing something drastic, like skipping out on your loan payments, consider getting some help. There are plenty of government mortgage assistance programs that can help you get back on your feet. Let’s take a look.
Understanding when you need help may be difficult. Let’s say you lost your job in 2020. Thanks to government stimulus programs, you were able to keep up with your mortgage payments over the last year. However, some of those programs have ended and you’re still unemployed. Your savings are dwindling fast, and finding another job doesn’t seem likely in the immediate short term.
Once you realize you’ll have difficulty making your mortgage payments, act quickly. Generally speaking, banks report late payments once they exceed the 30-day mark, and that can cause a big hit to your credit score.
But even more frightening than damaging your credit is the prospect of losing your house. Since a mortgage is a type of secured debt, your property will be at risk of foreclosure if you fail to keep up with your payments. Although legally, banks aren’t able to foreclose on your home unless you’re at least 120 days delinquent, you’ll still want to move as quickly as possible to prevent it.
Loan modification is exactly as it sounds—the process of modifying, or changing, your current loan. This can mean altering the terms or length of your loan in order to make your payments more affordable. While loan modification can help better manage your loan payments, be aware that changing the terms may also mean you’ll pay more in interest, especially if you significantly extend the life of your loan.
There are several types of loan modification programs available depending on what type of loan you have, your personal financial situation, and your lender.
If you’re interested in a loan modification, be sure to read up on your available options based on your eligibility, lender, and loan type.
The Home Affordable Modification Program (HAMP), created as a result of the mortgage crisis in the early 2000s, allowed distressed homeowners to permanently reduce the principal of their mortgages.
Although this program has ended, the Flex Modification program mentioned above can still reduce your loan payments by up to 20% by adjusting your interest rate, loan term, and the forbearance of a portion of unpaid principal.
You’ve probably heard of refinancing, which is the act of securing a second mortgage to pay off your first. There are plenty of reasons for this, including changing your rate terms or rate length.
Streamline refinances are available for government-backed loans. Unlike typical refinances, streamlined refinances require limited credit documentation and underwriting, which may make them easier to achieve. Be aware that your loan must be current in order to qualify for a streamline refinance.
Even if you don’t have a mortgage that’s eligible for a streamline refinance, you may still have options when it comes to refinancing after the pandemic.
In April 2021, the Federal Housing Finance Agency announced a new program that allows low-income families with Fannie Mae or Freddie Mac properties to reduce their payments by as much as $250 per month. They’ll need to meet eligibility requirements for this:
Depending on where you live, you may also have access to state-backed assistance programs. New funding provided by the federal government is allowing state programs to fund relief efforts, such as New York's Homeowner Assistance Program, which is designed to provide grants up to $50,000 to eligible homeowners so that they may make missed mortgage payments.
In order to find programs for your own state, visit the National Council of State Housing Agencies website.
If none of these programs are suitable, you may want to consider other, non-government options for mortgage assistance. Research charities and churches in your area to see if they’re able to offer financial aid. Otherwise, consider whether selling your home may be a viable option.
There are a variety of different ways to apply for mortgage assistance. Depending on what program you’re applying for, you’ll need to meet eligibility requirements and fill out the necessary paperwork.
You won’t include payments received from mortgage assistance funds as income, but you will need to calculate how much mortgage interest you’ve actually paid when completing your taxes.
