Your financial situation can change at a moment’s notice. An illness, divorce or job loss can make it difficult to stay current on your mortgage loan. And unfortunately, the inability to pay your mortgage can result in foreclosure.
A foreclosure can devastate your credit history, and in many cases, it can be up to seven years before you’re able to qualify for another home loan. The good news is that you have options that aren’t as damaging as a foreclosure. These include a short sale, a mortgage modification or a deed-in-lieu of foreclosure.
These hardship provisions can be less expensive for lenders, but not every homeowner qualifies. Lenders will need to look at your income and assets to make sure you meet the criteria for a hardship provision, plus you’ll need to write a hardship letter.
A hardship letter is basically your explanation of the situation and why you need assistance. Lenders will take the hardship letter into consideration when determining whether you qualify, so it’s important to write a strong, compelling letter. Here are five tips for preparing your hardship letter
- The first paragraph of your hardship letter should explain your purpose for writing the letter, and provide information about yourself and the property. Include your name, mortgage account information and the address of the property. Mention whether you’re writing to request a short sale, a mortgage modification, a deed-in-lieu of foreclosure or another viable solution. There are different types of hardship provisions and the lender needs to know your desired outcome.
- Include the reason for hardship. Understandably, your personal finances are a private matter. But in this case, you need to be as specific as possible. The more information you provide, the more likely the lender will approve your request. For example, are you unable to pay your mortgage because of a job lost or the inability to work due to an illness. Or maybe you need a short sale—which lets you sell the property for less than you owe–because you’re going through a divorce and need to quickly sell the property.
- Make sure your letter includes steps you’ve taken to resolve the matter. Mortgage lenders want to see effort on your part. In other words, what have you done to try and remedy the problem. If you can no longer afford the payment, perhaps mention that the house has been listed on the real estate market for several months with no offer. Or bring up how you’ve been actively looking for better employment or a roommate to share the cost to no avail.
- End the letter by including your email and telephone number, and let the lender know you can provide supporting documentation to help your case.
It can take several months to hear whether you qualify for hardship assistance. The lender has to verify that the hardship is legitimate, and you’ll likely need to provide income statements and bank statements. Be patient. Based on the information provided, you’ll work with the lender to come up with a solution, whether it’s a mortgage modification, short sale or another alternative.
