A house in forbearance is a house where the mortgage payments have been temporarily suspended or reduced. This can happen for a variety of reasons, but most often it occurs when the homeowner is experiencing financial hardship. If you are currently in forbearance or are considering it, there are a few things you should know. In this blog post, we will explore what forbearance is and how it can affect you. We will also provide some tips on what to do if you find yourself in this situation.
What does it mean for your mortgage?
If you have a mortgage, there’s a good chance you’ve heard of forbearance. Forbearance is when your lender agrees to let you temporarily stop making payments on your loan. This can be a helpful option if you’re struggling to make ends meet and are in danger of defaulting on your mortgage.
There are two types of forbearance:
1. Traditional Forbearance: With this type of forbearance, your lender agrees to temporarily reduce or suspend your mortgage payments. The amount of time your payments are reduced or suspended will be determined by your lender, but it’s typically for three to six months. You’ll still be responsible for paying the interest on your loan during this time, so your balance may increase.
2. Deferred Payment Forbearance: With this type of forbearance, your lender agrees to temporarily postpone your mortgage payments. The amount of time your payments are postponed will again be determined by your lender, but it’s typically for 12 months. Unlike traditional forbearance, you won’t be responsible for paying the interest on your loan during this time, so your balance won’t increase.
Buy House in forbearance & you’ll need to begin making full mortgage payments again (including any unpaid interest). Your lender may work with you to create a repayment plan that fits within your budget and timeline.
If you’re considering applying for forbearance, it’s important to understand how it will affect your credit score and overall
How do you qualify for a forbearance?
Assuming your mortgage is backed by either Fannie Mae or Freddie Mac, you may be eligible for a forbearance if you’re experiencing hardship due to a natural disaster, involuntary job loss, reduction in income, or an increase in expenses. You must contact your servicer to request forbearance and provide documentation of your hardship.
If you’re approved for a forbearance, you’ll be able to temporarily stop making payments or reduce your monthly payment for up to 12 months. Your servicer may also agree to temporarily suspend or lower any escrow payments that are being made on your behalf.
During a forbearance period, interest will continue to accrue on your loan balance. When the forbearance period ends, you’ll be responsible for paying back any accrued interest as well as resuming regular monthly payments. If you’re unable to do so, you may be eligible for another type of assistance program such as a loan modification.
Conclusion
If you’re facing foreclosure, a forbearance on your mortgage payments can give you some breathing room to get back on track. However, it’s important to understand how forbearance works and what effect it will have on your credit score and ability to refinance in the future. We hope this article has provided some clarity on the subject so that you can make the best decision for your situation.
