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Having a better understanding of mortgage forbearance can be beneficial for homeowners, especially if their financial situation has changed. Thus, in this article, we will go over everything a homeowner should know about this economic hardship solution.
A mortgage forbearance can be a lifeline for homeowners facing a sudden change in their financial situation or in the event of economic hardship. As a result, everyone can benefit from a brief overview of the mortgage forbearance process and how it might be able to help them during challenging times. That said, it is also important for people to know what mortgage forbearance is not. But, before getting into all that mortgage forbearance is not, let’s go over what it actually is.
With a forbearance on your mortgage loan, a homeowner who is facing a short-term crisis is provided relief through reduced or even paused monthly payments on their mortgage for a specific period of time.
Typically, mortgage forbearance is requested when a homeowner is dealing with an unexpected event–a job loss, a natural disaster, major illness, or some other set of circumstances that impacts their ability to pay their mortgage in a timely fashion or at all. Though this does not necessarily negatively affect a borrower’s credit, a person considering forbearance should keep in mind that it will more than likely be noted on their mortgage history. Moreover, when it is all said and done, you are still responsible for the total amount of the missed or reduced payments.
The goal of mortgage forbearance is to allow people to temporarily stop making payments toward their mortgage. Depending on whether someone has a government loan or a private mortgage, their mortgage forbearance options might be different. Therefore, it is essential for a borrower to speak with their lender directly about mortgage forbearance before deciding this is the right option. What’s more, even after discussing a possible forbearance with your lending institution, deciding it is a good option for your current situation, and qualifying for it, you still need to apply for a mortgage forbearance.
The mortgage forbearance process typically starts with an application. In addition to filling out the application, you will need to provide your most recent mortgage statement, and more than likely go over your current monthly income, existing monthly expenses, as well as the reason for your financial challenges/hardship.
Once you have applied for a forbearance on your mortgage and get approved, your lender will work with you to set up a forbearance agreement. That said, in general, depending on your lender, mortgage, and qualification, your options may vary. In regard to the agreement itself, some of the key terms outlined in such an agreement often include the length of the forbearance, the monthly amount that you will be required to pay during this period when your forbearance ends, and whether or not your mortgage forbearance will be reported to credit bureaus.
If you are considering this option or are finding it difficult to make on-time payments, then in either scenario, you should speak with your lender to go over all your options, including mortgage forbearance. You will also need to contact your lender or mortgage company to start the forbearance application process. The good news here is that your lending institution will provide you with additional resources regarding this process, such as a more in-depth overview of mortgage forbearance and what you will need in order to apply, along with other pertinent information.
It is also crucial for people to know what mortgage forbearance does not do. Even though mortgage forbearance should not hurt someone’s credit score (as they will remain current on their loan), mortgage forbearance does not mean the mortgage is forgiven. It is possible that interest may accumulate on the loan when someone is not making payments, so this is important to clarify. Or it could take longer to pay off the loan. Finally, everyone who is applying for mortgage forbearance needs to understand how long it will last. Everyone has to make sure they know exactly when their monthly payments are going to resume.
Ultimately, this is just a brief overview of mortgage forbearance, but nevertheless, anyone who is having trouble keeping up with their mortgage payments should consider applying for mortgage forbearance. This can be a useful option for helping people stay in their homes without harming their credit scores or becoming delinquent on their loans.
Do you have questions about home loans or a possible forbearance? If so, Sammamish Mortgage can help. We are a local mortgage company from Bellevue, Washington, serving the entire state, as well as Oregon, Idaho, and Colorado. We offer many mortgage programs to buyers all over the Pacific Northwest and have been doing so since 1992. Contact us today with any questions you have about mortgages.
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