What Are Mortgage Assistance Programs?
Homeownership can be a great source of pride and accomplishment. But it's also a huge responsibility. Besides property taxes and taking care of all the plumbing and roofing issues, you also have to worry about a monthly mortgage payment. Then, all the interest is added to your home loan every day.
It's easy to get behind on payments or to owe more on your house than it's worth. This is especially true in a sluggish economy. Thankfully, many federal, state, and private mortgage assistance programs exist. They can help to save your credit score and relieve some of the stress and financial burdens of owning real estate.
Where Can I Find a Mortgage Assistance Program?
Perhaps you're struggling to make your mortgage payments, or you've already fallen behind. You can often work directly with your mortgage servicer to:
- Develop a better repayment plan
- Reduce your interest rate
- Waive certain fees baked into your purchase price (e.g., closing cost aid)
It's in the lender's interest to work with you as much as possible to avoid the hassle of foreclosure and associated closing costs.
Mortgage assistance programs are also offered through state and local governments. These programs offer services to local homeowners according to state laws. They include assistance such as:
- Mediation services
- Loan counseling
- Financial aid
- Free legal counseling
- Foreclosure postponement
The federal government administers some mortgage assistance programs through the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). For example, FHA loan programs are always available and provide homebuyer education and answers to frequently asked questions (FAQs).
While some federal programs have expired, others continue to offer help. The eligibility requirements are flexible. Help is available depending on:
- How far behind you are on your payments
- Whether you're a first-time homebuyer
- The type of loan you've taken out and whether it's from a participating lender
- Your household income (low-income limits)
- Whether your situation is temporary or permanent
- Whether you're unemployed, in the military, or disabled
What Types of Mortgage Assistance Are Available?
Several different forms of mortgage assistance may be available to you. Different initiatives apply depending on your situation, such as whether you seek help for your primary home. Below, you'll find information about key types of aid.
Modify or Refinance
One common type of mortgage assistance if you're struggling with your payments is loan modification. This is a permanent change to your loan achieved by:
- Lowering your monthly payment amounts
- Reducing the total amount of your mortgage loan
- Extending the number of years you have to pay off the loan
- Getting more favorable interest rates on your mortgage
Similarly, you can often get more favorable loan terms by refinancing your mortgage. That means using a new loan to pay off an existing one.
Another helpful form of mortgage assistance is direct financial aid. For example, down payment assistance programs can ease the burden of a home purchase. These programs may provide aid through:
- Interest-free loans
- Waiving certain fees, charges, or even a second mortgage or equity loan
If you're trying to avoid foreclosure, your lending company or loan officer might give you a short break. They might allow for a temporary reduction or suspension of your monthly payment, called a "forbearance." After the forbearance period, the mortgage lender may provide you with an affordable payment plan to repay the missed amounts.
Some mortgage companies and programs will help you if you're unemployed or underemployed. They might let you defer or make partial payments while you seek permanent employment. Although the interest on your loan continues to accrue, this temporary option helps. It provides some relief while you get back on your feet and may help you avoid losing your home.
Foreclosure Postponement and Mediation Programs
Some state laws and programs provide for a postponement or slowdown to the foreclosure process. This postponement encourages lenders and borrowers to work together. Collaboration often happens through mediation, which allows the parties to implement a plan that avoids foreclosure.
Hardest Hit Fund
The federal government set aside funds to help certain parts of the country hit especially hard by the housing crisis. This fund helped low- and moderate-income homeowners to
- Reduce their loan amounts
- Get mortgage assistance while unemployed
- Help transition to new housing after a short sale, among other potential benefits
While some programs no longer exist, new ones are always on the horizon. Whether it's another recession, a housing crisis, or a pandemic, new programs get tailored to the times. For example, following the COVID-19 crisis, the federal government established the Homeowner Assistance Fund (HAF) to help borrowers facing financial hardship.
The government takes an active interest in community development to keep the housing economy stable. Many states have housing finance agencies providing housing counseling and rental assistance. Also, federally backed home mortgage programs like Fannie Mae and Freddie Mac aim to keep housing affordable.
Get Help Avoiding Foreclosure
The thought of losing your home after investing so much in it is a nerve-wracking prospect. But most of us experience financial setbacks at one time or another. These setbacks can often lead to mortgage trouble and even foreclosure.
Get back on track with your mortgage by contacting an attorney with experience in foreclosure alternatives. A skilled attorney will be able to discuss your legal options with you. They can help you decide on the best course of action moving forward.
You Don’t Have To Solve This on Your Own – Get a Lawyer’s Help
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.