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When You are Struggling to Pay the Mortgage

The possibility of losing your home because you can’t make the mortgage payments is a terrifying proposition.  Maybe you are having trouble making ends meet due to a job loss, a cut in pay, or a host of other financial problems. Or possibly you’re one of the millions of Americans that has a mortgage that had a fixed rate for the first few years and then it adjusted and now the payment is just too high and you are unable to make them.

No matter the reason, the Federal Trade Commission (FTC), the nation’s consumer protection agency, has information and tips on how to save your home, and how to recognize and avoid foreclosure scams.

First things first… Know Your Mortgage

Do you have any idea what kind of mortgage you have? Are your payments going to increase? The FTC suggests that if you can’t tell by reading the mortgage documents you received at settlement, that you contact your loan servicer and ask. Your loan servicer is the company where you send your monthly loan payments.

Here are some examples of types of mortgages:

  • Hybrid Adjustable Rate Mortgages (ARMs): Mortgages that have fixed payments for a few years, and then turn into adjustable loans. Some are called 2/28 or 3/27 hybrid ARMs: the first number refers to the years the loan has a fixed rate and the second number refers to the years the loan has an adjustable rate. Others are 5/1 or 3/1 hybrid ARMs: the first number refers to the years the loan has a fixed rate, and the second number refers to how often the rate changes. In a 3/1 hybrid ARM, for example, the interest rate is fixed for three years, then adjusts every year thereafter.
  • ARMs: Mortgages that have adjustable rates from the start, which means your payments change over time.
  • Fixed Rate Mortgages: Mortgages where the rate is fixed for the life of the loan; the only change in your payment would result from changes in your taxes and insurance if you have an escrow account with your loan servicer.

If you happen to have an ARM, whether a regular or hybrid and the payments will increase that will have increased payments that you will or are having trouble making, find out if you can refinance to a fixed-rate loan.

Be sure to check your loan documents to see if you have a pre-payment penalty, many ARMs do for the first few years and that can cost you thousands at closing. If you are however planning to sell your home soon after your loan adjusts, refinancing might not be worth the cost. But if you’re planning to stay in your current home for a while, refinancing into a fixed-rate mortgage could be the best way to go.

If You’re Behind On Your Payments

If you are having trouble making your payments now or when your loan adjusts, contact your loan servicer and see if there are any options, and do it as soon as possible… The longer you wait the fewer options you will have.

One popular option that can really help is a loan modification under the HAMP program. Visit their website for more information HERE

  • A loan modification under the Making Home Affordable Modification Program (HAMP) might be possible if:
  • your home is your primary residence;
  • you owe less than $729,750 on your first mortgage;
  • you got your mortgage before January 1, 2009;
  • your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner’s association dues, if applicable) is more than 31 percent of your current gross income; and
  • you can’t afford your mortgage payment because of a financial hardship, like a job loss or medical bills.

If you meet these qualifications, contact your servicer. Here is some of the information to gather as it will be needed:

  • information about the monthly gross (before tax) income of your household, including recent pay stubs.
  • your most recent income tax return.
  • information about your savings and other assets.
  • your monthly mortgage statement.
  • information about any second mortgage or home equity line of credit on your home.
  • account balances and minimum monthly payments due on your credit cards.
  • account balances and monthly payments on your other debts, like student loans or car loans.
  • a completed Hardship Affidavit describing the circumstances responsible for the decrease in your income or the increase in your expenses.

Be sure to check out the site for more information, visit Making Home Affordable.

If you’re like millions of Americans and want to refinance but are underwater, you will want to ask if you qualify for the Home Affordable Refinance Program (HARP) or the HOPE for Homeowners (H4H) program. For more information, visit the U.S. Department of Housing and Urban Development.

If you are having trouble making your mortgage payment for whatever reason, don’t panic just yet… there is likely a program or solution available to help you out.

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