Tough times don’t have to cause you to lose your home. If you've taken a hit to your income or have to deal with unexpected bills, talk to your mortgage lender. The lender can make changes to your mortgage terms, such as lowering the interest rate or extending the payback time, so that you can make your mortgage payments. This process, called mortgage modification, usually starts with a phone call to your lender. Once the lender approves your modification, it's up to you to make your payments.
Contact Your Lender
Once you realize that you're in trouble, call your lender. Explain that you're concerned about making your mortgage payments and ask about mortgage modification. Be prepared to provide your lender with an explanation of your circumstances as well as information about your income, family size, expenses and debts. In some cases, the lender can make you an offer right away, though it may need to investigate your case more before modifying your loan.
Your lender will want to see proof of your circumstances, as well as your ability to make the modified mortgage payments. You'll probably have to write a letter of explanation, explaining and documenting your financial state. You'll also have to show proof of financial hardship, such as a letter of termination from your employer, as well as copies of your monthly bills. Ask your lender what types of documentation it considers acceptable.
Make Your Payments
Getting a mortgage modification does not mean that you are out of the woods. Under a mortgage modification program, your new payments will likely be between 31 and 41 percent of your monthly gross income, so some serious budgeting is in order. If you don't meet your modification terms, you risk losing your home for good.
Get Outside Help
Stay away from privately owned "foreclosure rescue" companies that charge upfront fees to “negotiate” a mortgage modification for you, warns the U.S. Department of Housing and Urban Development. In many cases, they don't do anything that you can't do for yourself. Plus, if you do need assistance in working with your lender, you can get it for free through HUD-approved housing counselors. Right now, you need every penny you can get; don't waste money on useless "services."
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