When the threat of foreclosure is near, consider mortgage assistance programs to help you avoid losing your home. Loan modifications are a permanent option for reducing your monthly mortgage payments. However, you must have documented financial need in order to qualify for the program. Creating a financial hardship letter is your first course of action when pursuing a loan modification.
A hardship letter is essential when submitting a request for loan modification. Your hardship letter details the events that led to your delinquent payments. Your hardship letter should be concise, but personal to connect the reader to your unique circumstances. Most types of financial hardship are considered when applying for mortgage loan modification if there is adequate proof. Proof of hardship should accompany your letter to the lender.
Divorce or legal separation from a spouse can lead to financial hardship. Couples often share household expenses and mortgage payments, however, when one spouse moves out of the home, the burden may be too heavy for the person remaining in the home. Detail the dates your spouse moved out of the home or cut off financial support when drafting your hardship letter. Proof of your divorce or legal separation, current pay stubs and copies of household bills can help support your request for loan modification due to hardship.
Instead of laying off employees, some employers choose to place employees on involuntary leave without pay. The period can be anywhere from one day to several months. If you are on furlough from work, you can submit a letter from your employer as documented proof. Include in your hardship letter details on when you are returning to work so that the lender can assess whether to place your loan into forbearance before approving a modification. Forbearance occurs when your loan payments are temporarily suspended or reduced.
A permanent injury or illness can lead to a sudden loss in income. If you are receiving disability payments from Social Security or your employer, you can provide case information along with your hardship letter. Mortgage modification is a great option if you are suffering financial hardship due to permanent disability since a fixed income means you can easily determine how much you can afford to pay based on your other household expenses.
Medical emergencies can lead to financial hardship depending on the amount of the medical expense. Bills that require long-term payoffs can help you get approved for a loan modification. Proof that you are unable to pay the bills over a short term is required to prove your financial hardship. Copies of your household bills, pay stubs, personal assets, credit accounts and outstanding medical bills can help you verify your need with your lender.
- Making Home Affordable: Programs
- "Investing in Real Estate"; Gary W. Eldred; 2009
- University of Illinois Extension: Common Reasons for Foreclosure
- U.S. Attorney Legal Services: How to Write a Hardship Letter