Three Common Mistakes When Writing Financial Hardship Letters

When you request a short sale, deed-in-lieu, or pretty much any other modification to your home mortgage, you’ll have to submit a financial hardship letter.

A hardship letter can make or break you—so you’ll want to make sure you avoid some of the common mistakes which homeowners make. 

Mistake #1:  Tone and Presentation

When writing a hardship letter, many people think that they are supposed to go on and on about their hardships.  You do, indeed, need to convey your hardships, but this is still a business letter and needs to be professionally expressed and formatted.

• Do make your plight sound dire, but don’t go on for pages and pages with all the details.


• Do make it clear this is your last resort, but don’t make the lender think that action on their part won’t be enough to salvage you.

You want to give the lender confidence that you can, with their help, recover and make your full payments thereafter without defaulting again.  Many people who actually obtain modifications to their loans end up in default again just a year later.

Lenders get frustrated with this, so give your lender a reason to be confident in you.  Lenders also get frustrated with ten page diatribes, so keep it short.

Mistake #2:  Leaving Out Information

Don’t forget the basics!  This means the number of your account, your current contact information, and the address of your home.  Explain not only why you’re behind or about to fall behind on your mortgage, but also how you would recover if your loan was modified.

This again comes back to confidence—you need the lender to know you are dedicated to saving your home, and what form that dedication takes.  Explain whether your situation is likely to be temporary or permanent and why. 

Mistake #3:  Leaving Out the Numbers

This seems like a given, but lots of people flat out skip this part, perhaps because budget forms are usually included in the package.  You’d be remiss not to give a brief overview with numbers though, just to make your point concretely.

Put together a brief table of your monthly income and expenses, and make it quite clear how much you’re in the red, and how much you’d need to get back in the black.

Obviously you’ll only want to be putting down your necessary monthly expenditures (that’s all you’re spending, right?), i.e. food, medical bills, electric bills, internet, etc. 

Following these tips should help you to avoid hardship letter pitfalls!