Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
What Is A Mortgage Forbearance Agreement?
With the COVID-19 pandemic continuing globally, many homeowners have found themselves out of work or struggling to pay their mortgage and other bills. They have become what is known as a delinquent borrower, and their loan is now categorized as non-performing.
But that doesn’t mean all is lost and that you will have to foreclose on your home! Lenders do offer what is known as a mortgage forbearance agreement.
Mortgage Forbearance Is An Agreement Between You & Your Lender
At its simplest, a mortgage forbearance agreement is an agreement between you and your lender to help ease the burden during times of economic hardship. This agreement is designed to catch delinquent borrowers up on their payments.
Mortgage Forbearance Agreements Defer Penalties
Usually, when you miss payments on your mortgage, you will have penalties places against you. In this case, penalties are deferred, and the lender agrees not to foreclose on the property.
Mortgage Forbearance Agreements Are Not Debt Forgiveness
It must be distinctly understood that mortgage forbearance agreements are not debt forgiveness. These agreements are for a set amount of time, and you still have to pay off your home loan after that time is up.
Mortgage forbearance agreements are for temporary financial problems caused by an unforeseen situation, such as a global pandemic. In some cases, the lender may agree to extend the forbearance agreement if your hardship is not resolved by the time it expires.
You Must Have All Appropriate Documents Detailing Hardship
Get together all of your documents that provide proof of hardship, including:
- Bank statements
- Proof of income
- Proof of unemployment
- Letter of hardship
Documents may vary from lender to lender so work closely with yours to get them the right paperwork.
Understand All Of Your Options
Mortgage forbearance is not a long-term solution. Before you go straight into a mortgage forbearance agreement with your lender, research, and understand all of your options. For example, you may be able to modify the loan to make it more affordable each month.
Whatever you choose, work with your lender to determine your best path and get you back to paying your mortgage.