The refinance program is open only to homeowners who haven't made a payment more than 30 days late within the past 12 months. The FAQs for this program state that "borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months will not qualify." That means if you deliberately missed a mortgage payment, you likely disqualified yourself from this program.
Missed payment wrecks credit scoreIf you're still tempted to skip a payment, you should be aware that that choice will harm your credit score, says Craig Watts, public affairs manager for FICO in San Rafael, Calif.
Credit scores weigh the recency, severity and frequency of your delinquent accounts, Watts says. That means the more recent a missed payment is, the greater the negative effect on your score. Payments made more than 90 days late -- or never -- will cause the most damage, and a pattern of delinquent accounts will hurt more than an isolated incident.
A lower credit score might seem a small price compared with the prospect of a cheaper mortgage payment. However, that lower score will cause consequences that shouldn't be taken lightly. If your score drops, you'll have more difficulty refinancing your mortgage, getting a car loan, obtaining new credit cards or opening new accounts at department or retail stores. You also could be required to make cash deposits to obtain utilities, cable television or cellular phone services, Watts says. The favorable terms you've enjoyed on your existing credit accounts could be altered to your detriment as well, Cunningham says.
What's more, if you willfully skip a mortgage payment, you'll still owe that amount, plus additional interest and penalties that can add up fast. If you miss several payments, you might not be able to recover financially even if your lender modified your loan. And if you eventually lose your home due to foreclosure, you might not be able to rent another place to live once your credit score has been damaged.
Long-term sustainability is key factorBut suppose your financial situation is such that you cannot make your mortgage payment and must conserve cash. Should you sell your car, borrow money from your family, tap into your retirement accounts or resort to other one-time fixes to make sure you don't miss a payment even if foreclosure is a near certainty or the financial or emotional burden of your house payment is insupportable?
The answer depends on your own unique situation, but the anticipated duration of your financial setback and what Cunningham calls the "long-term sustainability" of your loan should be important considerations. For example, if you've lost your job but expect to find another position quickly, you might want to find a way to get over the high tide and keep your home. On the other hand, if your situation isn't that easily mended, you might not want to take such drastic measures.
Perhaps the best advice for homeowners who are caught in a conundrum of whether to make their mortgage payment or give priority to a credit-card bill or other financial obligations is to get help. Cunningham says homeowners should consult a mortgage counselor who has been trained and certified by the U.S. Department of Housing and Urban Development. Counseling services are provided free of charge by nonprofit agencies.
Web sites for more informationU.S. Dept. of Housing and Urban Development
Making Home Affordable
National Foundation for Credit Counseling
FICO Credit Scores