Whether you lost your job recently, or have been struggling for a while to find a job, having a mortgage when unemployed is scary. Often people need help paying their mortgage, even if they do have a job. However, looming mortgage payments when unemployed puts on even more pressure to the job hunt.
If you are unemployed and have a mortgage, thankfully, you have options. There are some ways to alleviate the pressure of your house payments so you can fully focus on getting a new job. Here’s how to do it.
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Emergency Homeowners Loan Programs
The world, and the government, understand that things go wrong. People get fired, or laid off, all the time and programs for assistance have been created to help when people lose their jobs.
If you are unemployed because you got fired or laid off, you might qualify for the Home Affordable Unemployment Program (HAMP). This program can give people a break from paying their mortgage, or at least lowering their monthly payments, for typically 12 months. It can go for longer if necessary, but will require a re-evaluation.
The best way to utilize this program is to start the process right after you lose your job. It begins with a three month forbearance period, where the max payment you make on the home is 31 percent of your pre-tax household income. It’s essential to make these payments on time and in full to continue with the program. Then, before the end of the three months, your mortgage company will send an application for a more permanent modification to your loan until you find a job.
Be warned though; you can only file for a HAMP once on a mortgage. If you file for one, get a job and get off the program, then lose your job later, you can’t re-apply for it. So if you think you can get a new job quickly, hold off on applying for a HAMP.
Should You Downsize Your Home?
A mortgage is a serious financial commitment, and if you are afraid you won’t be able to meet it because of unemployment, maybe you need to get out of it. Instead of draining your savings and risking foreclosure, consider selling your home and downsizing to something more financially manageable.
This could mean getting a smaller home, moving to an apartment, or living with family. That way, you don’t completely destroy your savings or risk declare bankruptcy and going through foreclosure.
Refinancing Your Home When Unemployed
If you have been unemployed for some time, are looking to keep your home, and don’t qualify for a HAMP, refinancing your home is another solution. This can lower your monthly payments, decrease interest rates, and give you some flexibility on keeping up with your mortgage.
Be aware though that doing this will mean renegotiating how long you’ll be paying the mortgage. Depending on the type of mortgage you get, that could mean another 30 years of paying off your home. It can also mean that, while it might be good for you now, in the long run you might be paying more. Just be aware that a major decider in refinancing, especially if you are unemployed, is your credit score. If you have a bad credit score, refinancing will be much more difficult.
Some private lenders also have their own programs to help out unemployed borrowers. Check with your mortgage lender to see if you qualify for any programs and what they might do for you. Many have plans that can delay payments or decrease the principle due each month. Working directly with them can give you the flexibility you need until you get back on your feet.
Decreasing Other Debts, Making Extra Money
You might just be in a situation where, short of walking away from your home, you have to pay your mortgage. While you do have a financial responsibility to pay your mortgage bill doesn’t mean you can’t save money elsewhere.
If you don’t have a budget already, make one. Figure out how much money you need to spend each month to survive and how much you normally spend now. Where can you cut excess spending that can go towards your mortgage? Can you decrease things like your water and electric bills? Cut back, or cut out spending on luxuries like eating out or new clothes.
The more money you can save, the longer you can stay up to date on your mortgage. Another tactic is to try and make some extra money while on the job hunt. Investigate side gigs to make some extra cash. Maybe you can spend your time between applying for jobs driving for Uber, or pick up a part time job.
Remember, even if you are unemployed, you still have options for getting help with your mortgage. You can get government help, work with your lender, or find a solution to lower your monthly costs. The worst thing you can do though is hope for the best while hunting for a job. Get proactive, find solutions, plan for the worst and work for the best case scenarios. Make preparations in case finding a job takes longer than expected.
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