- 1). Apply for a mortgage modification. Lenders offer modification programs to borrowers with debt that exceeds 55 percent of income. Proof of debt, such as financial statements, will be required to review the modification. Borrowers who receive approval will benefit from lower mortgage payments.
- 2). Apply for mortgage forbearance. This program is reserved for people struggling with illness or unemployment. Forbearance stops mortgage payments for a specific amount of time. After the term expires, the borrower must pay a little more monthly toward missed payments.
- 3). Refinance the mortgage. If you don't qualify for loan modification, talk with the lender about refinancing the loan. A lower interest rate can reduce monthly payments, making the mortgage more affordable. Some lenders offer no-cost refinancing programs.
- 4). Negotiate a repayment amount. If you are in mortgage default, talk with the lender right away. Paying back all missed payments at once is overwhelming. Lenders are willing to set up payment arrangements, allowing the borrower to make small payments each month. This will bring your account current.
- 5). Arrange a pre-foreclosure sale if you can't afford the property anymore. Banks approve these sales when the loan amount exceeds the market value. For example, if a property is worth $300,000 and the borrower owes $400,000, the bank will accept $300,000 to payoff the loan. The bank writes off the $100,000 difference.
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