If you cannot repay your mortgage, prioritize immediate communication with your lender. Options include negotiating a temporary forbearance, loan modification to reduce payments, or a short sale to sell the property below market value. Bankruptcy is a last resort, as it stays foreclosures but harms credit. Prioritize solutions that avoid default notation on credit reports.

Contacting lenders early is critical because 60% of mortgage holders who applied for forbearance during the COVID-19 pandemic avoided foreclosure, per the Consumer Financial Protection Bureau (CFPB). Loan modifications, which adjust terms like interest rates or principal, helped 3.6 million U.S. homeowners avoid default from 2017-2021, according to the Federal Reserve. Short sales, where lenders approve a sale below owed amounts, prevent credit damage and occur in 20-30% of mortgage defaults, per the National Association of Realtors (NAR). Bankruptcy filings for mortgage-related reasons peaked at 1.1 million in 2020 but represent only 5% of total cases, as most homeowners exhaust alternatives first. Proactive engagement preserves credit and reduces financial harm, with 75% of lenders offering forbearance or modifications to prevent defaults, CFPB data shows.