How to Manage Your Mortgage When You’re Unemployed

Very little in life can cause a greater feeling of hopelessness than losing your job. Not only are you losing your source of income, but you could also potentially lose your home itself. It’s frightening, and it feels as if you have no control over the situation. But thankfully, that isn’t the case.

There is hope, after all. There are several programs designed to help with mortgage payments, which can keep a roof over your head while saving you money as you work to get back on your feet. If you require unemployed mortgage assistance, explore the following programs:

  • Mortgage Forbearance Agreements
  • Loan modifications
  • Disability insurance

These options are all designed to provide mortgage assistance for unemployed people. For more information on each, read on.

Mortgage Forbearance Agreements

Forbearance agreements are special agreements made between homeowners and mortgage lenders when the homeowner is unable to pay because of some temporary hardship, typically unemployment. During forbearance, mortgage payments will be temporarily suspended or reduced.

The suspended payments will have to be made up in some way. When the forbearance period ends, you will have to get current on your loan in one way or another. Typically, that would be by paying a larger monthly payment until you get current, or by adding the deferred amount onto the end of your mortgage payments, but you might also simply pay your lender a lump sum.

Forbearance doesn’t save you any money, and often results in a larger overall payment because of extended time for interest to add up. But during a forbearance period, you are not subject to the risk of foreclosure.

If you have a mortgage loan insured by the Federal Housing Administration (FHA), you may be eligible for an FHA Special Forbearance. Under Special Forbearance, the FHA requires lenders to suspend payments for a forbearance period of 12 months when homeowners demonstrate loss of income due to unemployment.

Loan Modification Program

Where forbearance is a temporary agreement to suspend payment before ultimately resuming under the original terms of the mortgage, loan modification is an agreement between the servicer and the borrower to change the terms of the mortgage itself. That may help with mortgage payments by lowering what you owe each month or otherwise altering the loan.

A tricky part of loan modifications for those that have lost their jobs is that you still have to be able to demonstrate that you will be able to pay your mortgage under the new circumstances. But if you are able to do so, this can be one of the best ways to get yourself in a more favorable situation that allows you to stay in your home despite your hardship.

If Freddie Mac or Fannie Mae own your loan, modification is an option you should definitely explore. If you can demonstrate financial hardship while also showing the ability to pay your loan, you could qualify for the Flex Modification Program. That program allows borrowers to decrease their payments by about 20%.

There are also modification programs available through many private lenders, but these will have their own in-house standards in order for homeowners to qualify.

Disability Insurance Programs

If you’re out of work because of an accident or illness, you may qualify for disability payments. These come in a few forms – from both the government, and private insurance companies.

The US government maintains both Social Security Disability and Supplemental Security Income programs. Only certain conditions can qualify for these programs, and the application process can be complicated.

The same can largely be said for long term disability policies you may be covered under from your prior place of work. Insurance companies can be quick to deny claims, so legal help may be needed.

The Bottom Line

Keeping your home after losing your job can be an incredible challenge. Unemployment can be a truly oppressive feeling, and handling your mortgage payments during this time might feel impossible. But despite this hopeless feeling, there are several paths forward.