If you are asking your mortgage lender for help because you can’t make your payments, you may need to write a financial hardship letter. This letter lets the lender know the exact circumstances of what happened to cause you to fall behind.
Your hardship letter must be very detailed and include the points that lenders look for when deciding if you are a good candidate for a loan modification.
Keep reading to learn more about the financial hardship letter.
Start With a Goal
Stop and think about your goal with the lender. Do you need a little more time to catch up on your payments? Do you need a payment arrangement that adds the missed payments onto your monthly payments spread over time?
Knowing what you want to achieve with the letter will help you get started. You want to let the lender know right off the bat what it is you need. This way they are in the right frame of mind as they read the rest of your letter, which should include the reasons that you need the hardship assistance.
The Details of the Financial Hardship Letter
Next, you need to come up with the details of the hardship letter. This is the meat of your writings, so make sure that it’s detailed and honest. You won’t include all of the following prompts, but you can use them to get you thinking about what lenders want to see in your letter.
- What happened to cause you to get behind on your payments? Did you lose your job, experience a pay cut, or fall ill? Think of what caused the downward spiral and speak about it in detail.
- How long will the hardship last? Did you get permanently hurt and cannot return to work? Is it something temporary that will resolve itself in a few months, allowing you to get back on track with your payments?
- What are you doing to rectify the situation? Show the steps that you’ve taken to make the situation better. Did you find a new job? Did you cut expenses in other areas? Think of what you’ve done that would help you get back on track.
In the letter, you must make sure that you include specifics. This includes the dates of events that occurred and even the place. Discuss as much about the incident as you can to paint a full picture for the lender. Next, make sure you have a statement in there that talks about how much you want to keep your home. This statement needs to come from the heart. Let the lender know why you want to keep the home. If you don’t show a true desire to keep it, the lender may not have it in them to give you a modification. They may feel better cutting their losses now rather than waiting for you to default in the future.
Make Your Resolution Clear
We can’t state this enough – you have to make your resolution clear. Once you make it known that you want to keep your home, you need to show the lender how you are going to do that. Explaining how you have overcome the issue is just the start.
You need to provide plenty of detail on the steps you took and even provide any proof that you can. If you got another job with higher pay, you can show your paystubs or employment offer letter. If you liquidated assets to catch up on your mortgage, show the bill of sale and the deposits in your bank account.
Anything that you can show the lender to show that you are doing what you can to not only catch up, but to make sure that you don’t fall behind again will help. Lenders are going to want to know that you can afford your payment beyond a reasonable doubt. If you are asking for a lower payment either via a lower interest rate or longer term, make sure you that you prove that you can afford that lower payment. Again, lenders don’t want to do the work of a modification only to have you default in the future.
Writing a financial hardship letter is the key to a successful home modification. Don’t skimp on the details or the proof – your lender will likely ask for it anyway, so why not give them what they want upfront? It may increase your chances of approval in the end.