What To Do if You’re Behind on Your Mortgage Payments

If you're behind on the mortgage payments for your home, you're not alone. According to the Consumer Protection Financial Bureau, the number of people behind on their mortgages by 90 days or more over the last decade peaked in 2010 – both nationwide at 4.9% and in Texas at 3.6%.

While the number of people behind on payments has lowered year over year since then, .8% of all Americans and Texans alike were 90 days or more behind or more on their house payments in March of 2019. Texans in the Houston metro area were falling 90 days or more behind on mortgage payments at a rate of .9% during that same timeframe.

The share of people 30-89 days behind on mortgage payments is even larger, with the country reporting a mortgage delinquency rate between 30-89 days of 1.8% nationally, and 2.4% in Texas. The Houston metro area clocks in as having a 30-89 day behind rate of 2.6%, likely due in part to flooding issues being experienced across the area.

Q4 2020 Mortgage Delinquency Rates

Over 264,900 Texas mortgages were past due in fourth quarter 2020, according to data from the Mortgage Bankers Association. Of those mortgages, around 14,700 are 90 days past due.

So what can you do if you've fallen behind on your mortgage?

Below you'll find numerous options for dealing with a mortgage you're behind on or can't afford below.

#1 – Talk with your lender

The first step is to contact your lender and let them know there's an issue.  See if there’s anything they can offer to help resolve this.  The sooner you do this, you may be able to avoid fees and penalties from adding up.

Payment plans

Your lender may offer a repayment plan, which would allow you to pay your past-due balance, on top of your regular monthly payments, over some time.  Even if you don’t qualify for a repayment plan, there are plenty of other options available.  Read on to learn what these are, so you can choose the method that is best for your financial situation.

Forbearance & reinstatement

If your financial hardship is only temporary, a forbearance program might work well for you.  In a forbearance agreement, you are provided with a brief period when the amount you owe on your mortgage is lowered.  Of course, once this period is over, you’ll need to resume your regular monthly payments.  This option is only beneficial if you’ll be able to resolve your financial issues in the near future.  If you choose to seek a forbearance agreement, be sure to negotiate so that the terms are favorable, and you're able to meet the requirements.

Loan modifications

A loan modification is when a changes are made to the existing terms of a mortgage by the lender, usually as a result of a borrower's inability to repay the loan under the current terms. The primary goal of a loan modification is to reduce your monthly payment. This outcome can be achieved by lowering the principal loan amount, decreasing the interest rate, converting to a fixed rate if you had an adjustable rate mortgage, or extending the life of the loan (think of this as restarting your mortgage from the day the loan modification goes into effect).

This is also a popular option for people with equity in their home who have fallen behind in their mortgage payments and cannot come up with the funds needed to bring the mortgage current. Borrowers can often roll any past due payments and fees into the total balance due on their loan via the modified mortgage note. You can learn more about loan modifications and how to apply for one here.

#2 – Talk with family or friends to see if you can get a personal loan to catch up on payments

Sometimes people can be embarrassed about being behind on their mortgage and be reluctant to let friends or family know they're experiencing a hard time. We suggest putting pride aside and seeing if there is a friend or family member who may be willing to make you a personal loan to catch up on payments – especially if the financial trouble was temporary in nature.

We worked with one woman who was facing foreclosure, but didn't tell her family about it until she had decided to sell the home. Her financial troubles were temporary, and she only needed about $8,000 to bring her mortgage current, but had no way to raise the cash herself.

After she informed her family she was going to have to sell her home, her Dad stepped up and made the reinstatement payment for her. She worked out a monthly payment schedule with him to repay the loan, and she was able to keep her house. Had she reached out for help before the foreclosure process started, she likely could have saved herself the fees incurred during the process.

#3 – See if government agencies can offer any help

There are some programs to assist homeowners who are at risk of foreclosure and otherwise struggling with their monthly mortgage payments. The majority of these programs are administered through the U.S. Treasury Department and HUD. You can learn more about these programs on our foreclosure assistance page.

#4 – Upside down? Ask for a principal reduction

A principal reduction subtracts from the outstanding principal balance on your mortgage. However, you’ll have to meet several requirements to qualify for this, which is referred to as a principal reduction alternative.  You must have obtained your mortgage before 2009, your loan must not be Fannie Mae or Freddie Mac, and your house must be worth less than what you owe.

#5 – Explore ways to lower your monthly payment

If you find a way to catch up on the past due amount of the mortgage, we recommend you explore ways to lower your monthly payments to prevent the situation from reoccurring. You'll find methods and tips for lowering your mortgage payments here.

#6 – Lease your house

Leasing your home to a tenant may be a viable option for people who can catch up on their past due amount, but cannot afford the mortgage on a monthly basis. You find a tenant either on your own, or with the help of a real estate agent, and rent the home at an amount that covers your monthly mortgage payments.

Whether or not to lease your home is a big decision, and can depend on a variety of factors.

• You'll need to be able to lease the home at a higher monthly payment amount than your PITI – principal, interest, taxes, and insurance – payments.
• Your homeowner's insurance raise will rise a bit, as insurance companies charge more for landlord policies than they do owner-occupant policies.
• Any tax exemptions being applied to the property that stem for it being your personal residence will no longer apply, so the amount owed in property taxes each year may rise.
• You will still be on the hook for repairs that may be needed to lease the home initially, and any repairs needed moving forward as long as you own the home.
• If property values are rising year over year in your area, you'll need to account for that in any long-term leases.
• Tenants have the potential to cause damage to the home, which could cause the need for additional, significant financial investments in the home.

That said, a lease could be a viable long-term option to allow you to keep the home and turn it into an investment property that could produce cashflow. It can also serve as a short-term option that allows you to alleviate the financial burdern of the home in the immediate term, and then sell or move back into the home near the end of the tenant's lease.

#7 – Sell your house

Some financial issues aren't temporary. If you can't realistically afford the mortgage, and can't or don't want to find a tenant, it may be best to sell the home. If this is the case, the sooner you decide to sell, the better you'll make out regarding your equity in the home. Mortgage lenders tack on numerous late fees when the mortgage goes delinquent, and even higher fees if the mortgage goes into default. These fees can quickly rack up and reduce your equity in the home by tens of thousands of dollars.

Waiting until the last minute to sell also reduces your buyer pool dramatically, and requires a quick close that usually comes at the cost of a discounted sales price. The earlier you make the decision to sell a home you can't afford, the more leverage you have in the negotiation process with buyers.

If you're issue is that you need the equity in your home to be able to afford to move, you can often negotiate a leaseback. A leaseback allows you to close on the sale of your home and get your proceeds in hand before you need to move out of the home.

Short leasebacks are not uncommon, even in retail sales. Longer leasebacks has the potential to affect your buyer pool and affect your negotiations in other areas, such as sales price, in a negative fashion. If you need a leaseback in the sale of your home, the shorter it is, the better it will typically be for your overall net from the sale.

Sell using a Realtor

If you plan to use a Realtor to sell your home and you are behind on your mortgage payments and need to sell quickly, you'll want to be sure you work with a Realtor that is experience with fast sales and the pre-foreclosure process and timeline. All real estate agents are not created equally. Additionally, you'll want the agent to be experienced with selling a house as-is too. If you're unable to make your mortgage payments, it is unlikely you'll have extra cash laying around to do repairs that may be requested by buyers.

If you're in this situation and want to sell your home on the market, we recommend you reach out to Roots & Wings Realty Group. They are Texas Realtors, but even if you're not in Texas, they can recommend an agent near you with experience in these kind of sales.

Sell to a cash house buyer

Cash buyers can close quicker than financed ones and usually buy in as-is condition, with the buyer paying all closing costs. If you have less than a month to sell, or your home is in need of significant repairs, this may be the best route available to you. Cash house buyers like AMI typically close in 7-10 days. If you'd like us to make a no-obligation cash offer for your home, click here.

Beware of house buyer scams

There are numerous legitimate house buyers in the Houston area. However, there are also a lot of scam artists as well. Learn more about how to ensure you're working with a reputable house buyer here.

#8 – Don't ignore the problem

Whatever you do, don't ignore the problem. Falling behind on your mortgage payments can destroy your credit, eat away at the equity in your home via penalties and late fees, and can even lead to foreclosure. Dealing with the problem head on and without delay is the best way to save your home and/or your credit and equity.