Options When You Can’t Afford Your Mortgage
Understand your choices, protect your credit, and reduce the risk of foreclosure when mortgage payments become hard to manage.
Falling behind on your mortgage can feel overwhelming, but you have more choices than simply waiting for foreclosure. Mortgage servicers, government programs, and housing counselors often have tools that may help you stay in your home or exit it with less financial damage.
This guide explains common options, how they work, and how to talk with your mortgage company so you can choose the strategy that best fits your situation.
First Steps When You Expect Trouble
Acting early usually leads to better outcomes. Many servicers are required by investors and regulators to reach out to struggling borrowers and consider foreclosure alternatives before starting a foreclosure.
Contact your servicer right away
Your mortgage servicer is the company that sends your mortgage statements and collects payments. As soon as you think you may miss a payment, call the customer service or loss-mitigation number on your statement.
- Explain why you are having trouble (job loss, reduction in hours, medical bills, divorce, disaster, etc.).
- Share whether the hardship is likely short-term (for example, a few months) or long-term (permanent reduction in income).
- Ask which hardship assistance options they offer and what information they need from you.
Servicers generally prefer to find a solution that keeps you in the home rather than foreclosing, because foreclosure can be costly and time-consuming for everyone involved.
Gather your financial information
Most loss-mitigation programs require documentation so the servicer can assess which options you qualify for.
- Recent pay stubs or proof of income (such as unemployment, Social Security, or disability benefits).
- Tax returns or W-2s, if requested.
- Bank statements.
- A list of monthly expenses and other debts.
- Any documents that explain your hardship (layoff notice, medical bills, disaster assistance paperwork).
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Get help from a housing counselor
You can work with a HUD-approved housing counseling agency at little or no cost. Counselors can help you understand your choices, review servicer offers, and avoid scams.
To find a counselor, visit the U.S. Department of Housing and Urban Development (HUD) website or call their toll-free housing counseling line.
Options If Your Hardship Is Temporary
If you expect your income to recover or your expenses to decline within a limited time, there are ways to pause or catch up on payments rather than permanently changing your loan.
Forbearance: Temporarily reducing or pausing payments
Forbearance allows you to make reduced payments or no payments for a set period while you deal with a short-term hardship, such as a medical event or temporary unemployment.
- You are not forgiven for missed payments; you will have to repay them later.
- The forbearance period and terms depend on your loan type (conventional, FHA, VA, USDA) and investor rules.
- Servicers may offer forbearance without full documentation in certain emergencies, but can later request financial information to determine long-term solutions.
Common ways to repay missed amounts after forbearance
- Lump-sum repayment – Paying all missed payments at once (often not required; ask your servicer specifically).
- Repayment plan – Spreading missed payments out over several months in addition to your regular payment.
- Payment deferral or partial claim – Moving missed payments to the end of the loan or into a separate, interest-free junior lien that is only paid when you refinance, sell, or pay off the loan.
- Loan modification – Permanently adjusting the loan terms if you cannot afford the original payment when forbearance ends.
Repayment plans: Catching up over time
A repayment plan lets you bring the loan current by adding a portion of the overdue amount to your regular monthly payment for several months.
- Best if your income has recovered and you can temporarily afford a higher payment.
- The plan typically lasts several months, depending on how much you owe and your budget.
- If a repayment plan would make your payment unmanageable, ask whether a modification or other solution is available.
Options If Your Financial Situation Has Permanently Changed
When your income has dropped for the long term or your expenses have increased permanently, you may need more durable changes to your mortgage payment.
Loan modification: Permanently changing the loan
A loan modification is a permanent change to one or more terms of your mortgage to make your payment more affordable and resolve the past-due amount.
Depending on the program and investor rules, the servicer may:
- Reduce the interest rate.
- Extend the loan term (for example, from 30 years to 40 years).
- Capitalize (add) the overdue amount to the principal balance.
- In limited cases, forgive a portion of principal.
Many post-crisis programs were designed to reduce monthly principal, interest, taxes, and insurance (PITI) to a sustainable share of a borrower’s income, such as around 31 percent in earlier federal initiatives, which research found effective in preventing foreclosure.
Typical steps in a modification process
- You submit a complete loss mitigation application with income, expenses, and hardship information.
- The servicer reviews your package under investor rules and determines eligibility for one or more modification programs.
- You may be offered a trial modification with reduced payments for several months.
- If you make all trial payments on time, the servicer finalizes the permanent modification documents for you to sign.
Refinancing: Replacing your loan with a new one
In some cases, you may be able to refinance into a new mortgage with a lower interest rate, longer term, or different type of loan.
- Refinancing can be effective when you still have decent credit, enough equity, and stable income.
- Research by housing policy organizations indicates that streamlined refinance programs can significantly reduce default risk when they lower monthly payments.
- Refinancing can carry closing costs and fees; compare offers carefully and beware of high-pressure sales.
If you are already seriously delinquent, refinancing may be difficult; in those cases, a modification or other workout with your current servicer is usually more realistic.
If Keeping the Home Is Not Realistic
Sometimes the safest financial choice is to transition out of the property in a controlled way rather than face foreclosure. Options that help you exit can limit credit damage and, in some circumstances, allow relocation assistance.
Selling the home
If you have enough equity to pay off the mortgage and selling costs, a traditional sale may be the least damaging option.
- You avoid a foreclosure record on your credit history.
- If you sell before you are deeply delinquent, you may reduce the impact on your credit score.
- Work with your servicer if timing is tight; they may delay foreclosure steps if you have a serious sale contract in process.
Short sale: Selling for less than you owe
A short sale occurs when the servicer agrees to let you sell the property for less than the total amount owed on the mortgage and related costs.
- You list the home with an agent knowledgeable about short sales.
- When you receive an offer, the servicer reviews it and must approve the sale price and terms.
- The servicer may agree to release its lien even though the sale proceeds do not fully repay the loan.
In some programs, the remaining balance (called a deficiency) can be forgiven, while in others it may still be owed. Ask the servicer to confirm in writing whether any deficiency will be pursued.
Deed in lieu of foreclosure
With a deed in lieu of foreclosure, you voluntarily transfer ownership of the home to the lender or investor in exchange for a release from the mortgage obligation, subject to program rules.
- You must usually show that you tried but were unable to sell the property.
- The home typically needs to be free of other liens, such as certain second mortgages or judgment liens.
- Some programs offer relocation assistance if you cooperate and leave the home in good condition.
Compared with foreclosure, a deed in lieu may be faster and somewhat less damaging to your credit, though it is still a serious negative event.
Comparing Major Options at a Glance
| Option | Main Purpose | Suited For | Stay in Home? |
|---|---|---|---|
| Forbearance | Pause or reduce payments for a limited time | Short-term hardship expected to improve | Yes, if you comply with terms |
| Repayment plan | Catch up on missed payments gradually | Income has recovered and you can pay extra temporarily | Yes |
| Loan modification | Lower payment permanently and resolve delinquency | Long-term or permanent drop in income | Yes |
| Refinance | Replace loan with new, more affordable one | Still decent credit and sufficient equity | Yes |
| Short sale | Exit home when balance exceeds value | Cannot afford home, little or no equity | No |
| Deed in lieu | Transfer home back to lender to avoid foreclosure | Cannot sell or afford, willing to move out | No |
Protecting Yourself During the Process
While you are exploring options, there are important steps you can take to reduce financial damage and avoid scams.
Know how delinquency affects your credit
Most mortgages are reported late to credit bureaus after a full payment is 30 days past due; delinquency rates are tracked widely in housing data.
- Each additional missed payment (60, 90 days late) generally hurts your credit more.
- A foreclosure, short sale, or deed in lieu will typically stay on your credit report for years.
- Staying in contact with your servicer and entering an approved workout can help avoid the worst outcomes.
Watch for foreclosure rescue scams
When homeowners fall behind, they often become targets for companies claiming they can stop foreclosure or negotiate with the lender for a large fee. State consumer protection agencies warn that many of these offers are misleading or illegal.
- Be suspicious of anyone who guarantees results or tells you to stop communicating with your servicer.
- Avoid companies that demand upfront fees before providing any written offer.
- Use HUD-approved housing counselors or legal aid organizations instead of unregulated “rescue” firms.
Understand your rights and timelines
Mortgage servicing rules, investor guidelines, and state laws often require servicers to consider loss-mitigation options and to give certain notices before starting foreclosure.
- You generally have the right to be evaluated for loss mitigation if you submit a complete application within specified timeframes.
- Servicers must usually provide written decisions explaining whether you are approved or denied for options like modifications.
- You may have appeal rights if a modification is denied under some programs.
Because rules can differ by state, consulting a local housing counselor or consumer law attorney can help you understand specific deadlines and protections where you live.
Strategies to Reduce the Risk of Future Delinquency
Once your immediate crisis is addressed, focusing on long-term stability can make it less likely that you will face serious mortgage trouble again.
- Build an emergency fund in a savings account to cover at least several months of housing costs; research shows liquid reserves significantly reduce default risk.
- Review your budget and look for ways to lower non-essential spending so you can prioritize housing, utilities, and essential insurance.
- Stay in regular contact with your servicer if your situation changes; early communication gives more room to find solutions.
- Monitor your credit to track how your mortgage history is reported and to spot errors quickly.
Frequently Asked Questions
How many payments can I miss before foreclosure starts?
Foreclosure timelines vary by state and loan type, but many servicers do not begin the formal foreclosure process until a borrower is at least several months behind. However, late fees and credit reporting typically begin after the first payment is 30 days past due, so you should contact your servicer as soon as possible rather than waiting.
Will asking for help hurt my credit?
Talking with your servicer or a housing counselor does not, by itself, affect your credit score. Your credit is mainly impacted by whether payments are reported late, how late they become, and whether events like foreclosure or short sale occur. Entering an approved program, such as a modification or forbearance, may be less damaging than continuing to miss payments without a plan.
Can I stay in my home during forbearance or modification review?
Yes, in most cases you remain in the home while the servicer reviews your application or while you are complying with a forbearance or trial modification. You are still responsible for maintaining the property, paying required insurance, and following program rules.
What if my servicer won’t work with me?
If you are having trouble with your servicer—such as delays, lost paperwork, or confusion about decisions—contact a HUD-approved housing counselor or a nonprofit legal services organization. They may help you communicate with the servicer and understand any additional rights you have under federal or state law.
Is bankruptcy an option to save my home?
Bankruptcy is a serious legal step that can have long-lasting effects on your credit and finances. In some cases, a Chapter 13 bankruptcy plan may help a homeowner catch up on missed payments over time while stopping a foreclosure temporarily. Because of the complexity and consequences, you should consult a qualified bankruptcy attorney to discuss whether this approach makes sense for your situation.
References
- Preventing Defaults and Managing Delinquencies — Fannie Mae Servicing Guide, Section A4-2.1. 2023-10-11. https://servicing-guide.fanniemae.com/svc/a4-2.1-01/preventing-defaults-and-managing-delinquencies
- A Complete Guide to Mortgage Delinquency — Rocket Mortgage. 2024-02-06. https://www.rocketmortgage.com/learn/mortgage-delinquency
- Preventing Foreclosures — Urban Institute. 2024-07-01. https://www.urban.org/research/publication/preventing-foreclosures
- How to Protect Yourself: Tips for Avoiding Mortgage Foreclosures — Florida Office of the Attorney General. 2023-03-15. http://www.myfloridalegal.com/consumer-protection/how-to-protect-yourself-tips-for-avoiding-mortgage-foreclosures
- Mortgages 30–89 Days Delinquent — Consumer Financial Protection Bureau. 2024-06-01. https://www.consumerfinance.gov/data-research/mortgage-performance-trends/mortgages-30-89-days-delinquent/
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