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Before you do anything regarding a loan forbearance
Before you do anything regarding a loan forbearance, call your current loan servicer to see what their specific rules are that they have regarding forbearance.
Remember that I am not "The Expert, just and Expert" so call your loan servicer for more info.. If you want to chat with us 928-237-4400!
What is mortgage forbearance?
A mortgage forbearance is an agreement with the lender to be late on your mortgage payments without it impacting your credit scores. The mortgage forbearance provides temporary relief by allowing the loan to be late or miss payments for a specific period of time. It is generally requested by homeowners dealing with an event that impacts their ability to pay their mortgage, like a job loss, natural disaster or major illness. The loan is still late, and those late payments still need to be made up and paid to the lender.
Mortgage forbearance is not a waiver or a grant; you’ll still owe the amount of those missed or reduced payments.
Will mortgage forbearance affect my credit?
Unless your lender has agreed not to report it, your forbearance will be reported to credit bureaus. But mortgage forbearance is less damaging to your credit score than a missed payment and helps you avoid foreclosure. According to the rules within Fannie Mae, currently there is a 12 month waiting period before you can get a mortgage once you have removed the home from forbearance and current on the mortgage. This may change as the market adjusts.
Do you need to pay back the missed payments?
When the forbearance period ends, you’ll have to pay your lender back according to previously arranged terms. There are several options for making up the missed amount. With reinstatement, you repay with a lump sum. A repayment plan spreads the payments you missed over an allotted time period by adding a set amount to your regular monthly payment. Another option is to add the repayment amount to the end of the mortgage, lengthening its term. If your financial hardship lasts longer than you had anticipated, or you don’t have the funds for a reinstatement or repayment plan, ask your lender about a loan modification. A loan modification changes the terms of your mortgage to help make your payments more manageable.
Will forbearance impact my financial future?
Unless your lender has agreed not to report it, your forbearance will be reported to credit bureaus. In order to be eligible for a new home loan after forbearance — whether a refinance or purchase — you’ll need to re-establish yourself as a credible borrower.
Can I refinance if I am taking advantage of the forbearance?
No. Your loan must be current in order to refinance your loan.
Call me for details if you need guidance or have questions on a loan forbearance and how it can affect your plan to buy or sell - Be Safe out there.
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