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If you’ve recently fallen behind on mortgage payments, you’re not alone. More than 3 million homeowners missed, delayed, or made a partial payment in September 2020, according to the Mortgage Bankers Association — a sign of how the coronavirus pandemic continues to weigh down the economy.
But homeowners who are late on their mortgage payments have options for avoiding foreclosure.
Here are five ways to catch up on your mortgage payments:
- Refinance your mortgage
- Apply for mortgage forbearance
- Negotiate a loan modification
- Reduce your monthly housing payment
- Set up a repayment plan
1. Refinance your mortgage
Best if: You have good credit to qualify for a low interest rate, and you plan to stay in the home for a while.
Refinancing — which allows you to get a new mortgage with new terms — can substantially lower your monthly payment if you qualify for a lower interest rate. But keep in mind, eligibility for a refinance depends partly on your financial situation. You’ll generally need a:
- Credit score of at least 620
- Debt-to-income ratio of 43% or less
If you’re behind on mortgage payments because your adjustable-rate mortgage is causing your interest rate to change periodically, then refinancing into a fixed-rate loan can help stabilize your payments. Before moving forward with a refinance, you should also consider how long it will take to recoup upfront costs, which average $5,000 on refinance loans.
Credible can help you compare refi rates from our partner lenders. It only takes a few minutes to get prequalified. Find My Refi Rate
Checking rates will not affect your credit
2. Apply for mortgage forbearance
Best if: You can’t afford mortgage payments due to a temporary financial issue, such as a job loss.
Mortgage forbearance allows borrowers to temporarily suspend or reduce their mortgage payments for a specified period of time — without worrying about additional fees and interest. But when you call your loan servicer to check your forbearance options, ask how they plan to report your account to the credit bureaus.
Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, lenders might be required to report your account as “current” if you’re enrolled in a forbearance program. Some lenders also aren’t reporting late payments, or they’re waiving late fees for borrowers due to the pandemic.
Learn More: How Much Does It Cost to Buy a Home? Best if: You’re already behind on mortgage payments and need help making permanent changes to your mortgage terms. Homeowners with demonstrated financial hardship can also contact their lenders and apply for a loan modification. Unlike forbearance, which is temporary, a loan modification is an agreement with your lender that permanently changes your existing home loan terms. Depending on the program, the lender may agree to extend your loan term or reduce your interest rate. The goal is to make your monthly payments more affordable, but you don’t have to qualify for a new mortgage or come up with closing costs. Here are some of your options: Find Out: Loan Modification vs. Refinance: How to Decide Best if: You’ve found ways to cut down on your taxes and insurance. A homeowner’s monthly house payment encompasses more than just principal and interest — it also includes insurance, taxes, and other fees. If you need to put some wiggle room in your budget, you can consider these ways to reduce these costs: Best if: You have room in your budget for a higher mortgage payment. If you’re still wondering what to do if you can’t pay your mortgage, call your lender and ask about a customized repayment plan. Your lender may work with you, especially if you can show your income has stabilized. They may take your past-due amount and add to your upcoming mortgage payments, spread over a few months. If you’re in the market for a new home, you’ll want to shop around for home loans. Credible streamlines this process and makes comparing multiple lenders easy — you can see your prequalified rates from our partner lenders in the table below in just a few minutes. 3. Negotiate a loan modification
4. Reduce your monthly housing payment
5. Set up a repayment plan
