Behind on Your Mortgage? Here Are Your Real Options.
If you've missed a payment — or you're about to — you have more options than you think. This guide walks you through every path, from keeping your home to walking away strategically.
First Call to Make
HUD-approved housing counselorsprovide free, confidential foreclosure prevention help. They're not salespeople — they're government-funded advocates who can negotiate with your lender on your behalf.
Call 800-569-4287 (free, HUD.gov)
The 5 Options When You Can't Make Your Mortgage Payment
Forbearance
Keep your home — temporary relief
A forbearance agreement temporarily pauses or reduces your mortgage payments for 3-6 months (sometimes up to 12). Your lender agrees not to start foreclosure during this period. It's designed for short-term hardship: job loss, medical emergency, natural disaster, or temporary income reduction.
The catch: You still owe the missed payments. When forbearance ends, you either pay them all at once (lump sum), spread them over 6-12 months (repayment plan), or add them to the end of your loan (deferral). Make sure you understand which option your servicer is offering before you agree.
Best for: Homeowners with temporary income disruption who expect to resume full payments within 3-12 months.
Loan Modification
Keep your home — permanently lower payment
A loan modification permanently changes your mortgage terms — typically lowering your interest rate by 1-2 percentage points, extending the term from 30 to 40 years, or both. Unlike refinancing, you don't take out a new loan. Your lender adjusts the existing one. No closing costs, no credit check in most cases.
How to apply: Call your loan servicer and ask for a “loss mitigation application.” You'll need a hardship letter explaining your situation, 2 months of pay stubs, 2 years of tax returns, bank statements, and a monthly budget worksheet. The process takes 30-90 days. Do not stop making payments while your application is pending unless your servicer explicitly tells you to.
Best for: Homeowners with a permanent income reduction who want to keep their home but can't afford the current payment.
Short Sale
Leave the home — less credit damage than foreclosure
A short sale means selling your home for less than what you owe on the mortgage, with your lender's approval. The lender agrees to accept the sale proceeds as full satisfaction of the debt — or they may pursue a deficiency judgment for the difference (depends on your state and the agreement).
Credit impact: A short sale drops your score 50-130 points (vs. 85-160 for a foreclosure). It stays on your report for 7 years but lenders view it more favorably than a foreclosure. FHA mortgage waiting period: 2 years (vs. 3 years for foreclosure).
Tax implications: The forgiven debt may be taxable as income. The Mortgage Forgiveness Debt Relief Act excludes up to $750,000 of forgiven mortgage debt on primary residences (extended through 2025, check current status).
Best for: Homeowners who are underwater (owe more than the home is worth), can't afford payments, and want to minimize credit damage.
Deed in Lieu of Foreclosure
Leave the home — faster than short sale
A deed in lieu means you voluntarily transfer ownership of the property to the lender in exchange for being released from the mortgage. It's essentially saying: “I can't pay. Here are the keys.” The lender avoids the cost and time of foreclosure, and you avoid having a foreclosure on your record.
Credit impact: Similar to a short sale — 50-125 point drop, 7 years on your report. FHA waiting period: 2 years (same as short sale, better than foreclosure's 3 years).
When lenders accept it: Usually only when you've already tried to sell (short sale didn't work), there are no junior liens on the property, and you can deliver the property in reasonable condition.
Best for: Homeowners who can't sell (short sale failed or market is too slow) and want to avoid the public auction process of foreclosure.
Foreclosure Defense / Chapter 13 Bankruptcy
Legal options when nothing else works
If your lender won't negotiate and you want to keep your home, filing Chapter 13 bankruptcy triggers an “automatic stay” that immediately stops the foreclosure process. A Chapter 13 plan lets you catch up on missed payments over 3-5 years while continuing to make current payments. This is the nuclear option — but it works.
Separate from bankruptcy, a foreclosure defense attorney can challenge the foreclosure if the lender didn't follow proper procedures: missing notices, incorrect amounts, dual tracking (pursuing foreclosure while reviewing a modification), or securitization issues.
Best for: Homeowners with equity in their home worth protecting, and those who have income to make current payments but need time to catch up on arrears.
Which Option Is Right for You?
Can you afford any payment at all?
Yes → Forbearance or Loan Modification
No → Short Sale or Deed in Lieu
Do you want to keep the house?
Yes → Loan Modification (permanent) or Forbearance (temporary)
No → Short Sale (best credit outcome) or Deed in Lieu (fastest exit)
Is the home underwater (owe more than it's worth)?
Yes → Short Sale is likely the best path
No → Sell normally and pay off the mortgage
Has the lender started foreclosure proceedings?
Yes → Consult an attorney. Chapter 13 can stop the process immediately.
No → You still have time. Start with a HUD counselor (800-569-4287).
The Foreclosure Timeline
What happens after you miss a mortgage payment — and when you can still act
Missed Payment
- •Late fee charged (typically 3-6% of payment)
- •Grace period expires (usually 15 days)
- •Lender sends reminder notice
- •Credit report shows 30 days late (-60 to -110 points)
Default & Outreach
- •Second/third missed payments compound damage
- •Lender calls begin — answer them
- •Loss mitigation department may reach out
- •THIS is when to request forbearance or loan modification
Notice of Default
- •Lender files Notice of Default (non-judicial) or Lis Pendens (judicial)
- •Public record — affects credit score further
- •Pre-foreclosure period begins
- •LAST BEST WINDOW for loan modification or short sale
Pre-Foreclosure
- •Foreclosure sale date scheduled
- •Short sale negotiations with lender still possible
- •Deed in lieu may be offered as alternative
- •HUD counseling available (800-569-4287, free)
Foreclosure Sale
- •Property sold at auction (courthouse steps or online)
- •If no buyer: becomes REO (bank-owned)
- •Eviction notice issued (timing varies by state)
- •Deficiency judgment possible (check your state)
Recovery
- •Right of redemption period (state-dependent: 0-12 months)
- •Foreclosure stays on credit report 7 years
- •FHA mortgage: eligible again in 3 years
- •Credit score can reach 680+ within 3-4 years with rebuilding
Your State's Foreclosure Laws Matter
Foreclosure works completely differently depending on where you live. Texas can foreclose in 27 days. New Jersey can take 3 years. Some states protect you from deficiency judgments; others don't. Click your state below to see the specific laws that apply to you.
Non-recourse states (lender CANNOT pursue you for the difference after foreclosure):
Arizona, California, Minnesota, Montana, Nevada, North Carolina, Oregon, Washington
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