A mortgage forbearance is a tool to help people stay in their homes during times of hardship. It is an amazing opportunity, but unfortunately, it is not a long-term solution. Before you apply for one, or if yours is about to expire, know exactly what you should do and what you should expect, including how to get a forbearance or an extension, how long it lasts, and what you can do if you still can’t afford your mortgage at the end of the agreement.
What is a Mortgage Forbearance?
A mortgage forbearance is when your mortgage provider or your lender allows you to pause or reduce your mortgage payments temporarily. This will allow you to build back your finances and handle rough periods appropriately. However, this is a limited amount of time and cannot usually be extended.
A forbearance also does not erase your payments. It simply pauses when you need to play. It’s like a movie – you can stop the movie to grab popcorn or get some sleep, and then you start it up right where you left off. Forbearances follow the same pattern – you don’t skip any payments, you simply resume them once the agreement ends.
Before the end of the forbearance, your servicer will contact you about how to repay the missed payments.
How Long Does a Forbearance Last?
A forbearance typically spans from 3-6 months, depending on your lender. If you need more time, you can request an extension, though they can be hard to get. For most loans, a forbearance can be extended up to 12 months.
It also depends on what your mortgage is backed by. If you are currently in a forbearance, then there are some restrictions on extensions that you should be aware of. They are listed below.
Fannie Mae or Freddie Mac
To be eligible for this extension, you need to be in active forbearance on your Fannie Mae or Freddie Mac loan as of Feb. 28, 2021. If you are, then you can request up to two three-month extensions, for a maximum forbearance period of 18 months.
HUD/FHA, USDA, or VA Loans
If your mortgage is backed by HUD/FHA , USDA , or VA and you requested an initial forbearance plan on or before June 30, 2020, then you may be eligible. You may request up to two additional three-month extensions, for a maximum of 18 months of total forbearance. Not all borrowers will qualify for the maximum.
How to Get a Forbearance
All you need to do is ask your mortgage company or lender about their forbearance process. You may need proof of your financial hardship, such as recent bank statements and pay stubs, and your lender will want to know whether your hardship is short-term (six months or less) or long-term (more than six months).
What Happens During A Forbearance?
Nothing – you just don’t pay your mortgage with no impact to your credit or interest. For most loans, there will be no additional fees, penalties, or additional interest (beyond scheduled amounts) added to your account.
You are expected to put the extra money towards building up your funds and covering whatever emergency costs caused you to need a forbearance while yours is active. This is not a legal requirement, though, just a recommendation if you want to stay in your home.
What Happens when Your Mortgage Forbearance Ends?
If you’re nearing the end of your mortgage forbearance period, you have options. This best case scenario is that you were able to recover financially and can resume mortgage payments without any problem. If you can’t do this, don’t worry. You still have a few options.
Repayment Plans
You could enter into a repayment plan, which adds an agreed-upon amount to your regular monthly payments so you repay the forbearance amount over a longer time period.
Loan Modifications
You could seek a loan modification, which changes the terms of your mortgage so you can better afford the payments.
Sell Your Home
If you can no longer afford to stay in the home and can’t work out an agreement with your lender, then it may be time to sell your home. To avoid foreclosure and short sales, try calling us at Property Spot: 480-400-7792.
We will give you a fair cash offer for your home that will help cover your outstanding expenses and put some money in your pocket. There are no hoops to jump through and very little paperwork. All you need to do is give us a call to get the process started, and then you’ll receive a cash offer in 24 hours or less! You get to pick when you close as well, which will help give you time to get your affairs in order without any pressure from us. Reach out today!