Do you find yourself wondering, “is mortgage forbearance a good idea?”. Are you currently struggling to keep up with your mortgage payments?
If you find yourself behind on your payments and you need a way out, don’t worry. Just like you, there are thousands of other people in the United States who struggle to keep up with their monthly payments due to financial hardship.
If you want to learn more about mortgage forbearance and its effects, you will want to keep reading below. This brief article will cover what you need to know about mortgage forbearance and who you can contact for more help.
What Is Mortgage Forbearance?
Mortgage forbearance is an agreement that you make with your lender to pause your mortgage payments. This helps provide a temporary break from your monthly payments to help avoid going into foreclosure. Many homeowners go through a mortgage forbearance whenever they experience an unexpected hardship.
As a part of your agreement, you are responsible for paying the amount that the lender reduced or suspended. You will also need to pay any upcoming regular payments.
Depending on your situation, going through a forbearance may not negatively affect your credit score. For example, if COVID-19 or a natural disaster is the reason for your financial hardship, you may enter forbearance without affecting your credit score.
Forbearance vs. Deferment
Many people assume that deferment and forbearance are the same things when they are not. A deferment postpones your missed payments, and you will need to pay those missed payments at the end of your mortgage term. When you get to the end of your mortgage term, you will need to pay for this as a lump sum.
A deferral is an excellent option if you can start making your payments again, but you will need to reach out to your lender about the terms and conditions.
If you are in forbearance, you may want to opt for a deferral at the end of your forbearance period. This will help you pay back those mortgage payments later. As stated earlier, it is always best to speak with your lender to see which option is best for your situation.
Is Mortgage Forbearance a Good Idea?
If you still find yourself asking yourself, “is mortgage forbearance a good idea?” we have some pros and cons of mortgage forbearance for you to review to make your final decision. One of the biggest pros of forbearance is being able to avoid foreclosure. Missed monthly payments usually result in foreclosure, but forbearance can help prevent that.
Gives You Time
A forbearance helps you deal with short-term financial hardships. If you need your funds to go to other essential expenses during your time of difficulty, this will help you take care of that. You will still be able to keep your home while you focus on paying for groceries, utilities, or other vital expenses.
Even when you are going through a tough time, your lender wants to make sure that you are okay. Lenders offer forbearance as a relief option because they want to help their borrowers keep their loans. Most lenders prefer that you let them know about the financial hardship as soon as possible instead of missing your monthly payments without notice.
Cons of Forbearance
There is a chance that you going into forbearance could affect your credit score. The credit bureaus receive mortgage forbearance information which means that it could negatively impact your score. Even if it does affect your score, it won’t be as bad as missing a series of monthly payments.
Payments Could Increase
Your payments may increase after your forbearance period as a part of your agreed-upon repayment plan. As mentioned earlier, make sure that you review these terms and conditions with your lender to ensure that you can afford your new payments.
Only Good for Short-Term
Forbearance is only a good idea as a short-time solution. If you are having a hard time paying your mortgage regularly, you will need to look into other mortgage options. You may need to refinance your loan or sell your home if you cannot continue to make your payments.
Is Forbearance Bad?
Just like any other major financial decision, you will need to use your own judgment to determine if forbearance is right for you. Mortgage forbearance is a great mortgage relief option that helps borrowers stay afloat during their short time hardship. If you are currently experiencing hardship such as a temporary illness, temporary disability, or job loss, forbearance may be a good option for you.
Forbearance and the CARES Act
The federal government released their CARES Act relief plan as a response to the coronavirus pandemic. This trillion-dollar package included help for those with government-backed home loans. This includes anyone with an FHA, USDA, VA, or Freddie Mac and Fannie Mae loan.
Under this Act, homeowners can receive forbearance for up to a year. This meant that lenders could not foreclose on your home. There is no deadline to request forbearance under the CARES Act. You will need to make your initial request for 180 days of forbearance. If you need more time, you can ask for an additional 180 days.
My Loan Isn’t Government-Backed
If you have a loan that is not government-backed, you won’t have the same forbearance under the CARES Act. That does not mean that you cannot request forbearance from your lender. Make sure to reach out to your lender if you qualify for forbearance.
Forbearance and Refinancing
As mentioned earlier, you may be able to refinance your loan while in forbearance. If you claim forbearance due to a natural disaster or COVID-19, you may not have an issue with refinancing during that time.
You will need to make on-time payments at the end of your forbearance period to ensure that you are in good standing if you choose to refinance. If your forbearance is for another reason other than a natural disaster or COVID-19, you may have a negative impact on your credit score. If your credit score lowers because of your forbearance, you may not have many refinance options.
Alternatives to Mortgage Forbearance
Besides refinancing your loan, forbearance, or seeking a loan modification, the only other option is selling your home. You can try to sell your home to a homebuyer on the market, or you can sell your house for cash.
Some companies can offer you an all-cash offer in exchange for your home. If you want to quickly sell your home and not deal with the traditional way of selling your home, you may want to reach out to an iBuyer.
What Is an iBuyer?
An iBuyer, also known as instant buyer, is a company that uses cutting-edge technology to create an all-cash offer on your home. iBuyers use technology to quickly analyze the value of your property by comparing the homes in your area.
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- No Showings
- No Repairs
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Their technology also takes in the information that you input when listing the home’s features. It usually only takes about 24 to 48 hours before you hear back about your cash offer.
Once you accept the offer, the iBuyer takes complete responsibility for your home. This means that they take care of the marketing, owning, and reselling of your home on the market.
Why Choose an iBuyer?
Many people choose to use an iBuyer because they enjoy how quick the process is. The process is easy as four simple steps, and you can complete the entire process in a few days.
The all-cash offer given to you by the iBuyer is very competitive. The whole process of selling your home to an iBuyer is more convenient, simpler, and less stressful. There is no need to take time out of your day to show your home, and you won’t have to deal with the copious amounts of paperwork involved with traditional home selling.
Control and Flexibility
Although you have the option to close on your home within a matter of a few days, you won’t need to. When you go through an iBuyer, you have the option to choose your closing date. This means that you can either choose to close within a couple of weeks or a couple of months.
New Home Transitioning
If you are in the market of buying a new home, you can do so through your iBuyer. If you choose to buy a home through your iBuyer while you are selling yours to them, you have more flexibility.
Your iBuyer can help make the transition easier for you because they can put in an all-cash offer on your new home. If the seller accepts the offer, you can move into your new home while the iBuyer handles selling your old one.
Selling your home the traditional way is a lot less convenient than selling to an iBuyer. When you sell your home traditionally, you will have to ensure that your home is clean and ready to show all the time.
You will also have to deal with appraisals from several different homebuyers who want to inspect your home before they put in an offer. An iBuyer takes that entire process and throws it out the window. As mentioned earlier, they will take care of owning the home and selling it on your behalf.
iBuyer Selling Process
As stated above, the iBuyer process only takes four simple steps. It is important to note that the offer the iBuyer sends you is obligation-free.
Step One: Request Your Offer
Once you find your reputable iBuyer, you will need to send in a request. You will need to input the information about your home in addition to your personal contact information.
If your home meets the criteria of the iBuyer, you will receive an offer from them. It usually takes the iBuyer a day or two to get back to you.
Step Two: Accept or Decline
You have the decision to either accept or deny the offer you receive from the iBuyer. You typically have around five days to make your decision.
The offer letter the iBuyer sends you will include any fees or closing costs associated with the transaction. It will also list how much your expected net proceeds are.
Step Three: Schedule an Assessment
If you decide to move forward with the offer, you will need to schedule a home assessment. This inspection is free for you; the iBuyer will handle the inspection costs.
The point of the inspection is to ensure that your home matches the information you input in your application. It is also to see if the house needs any repairs.
If your home needs repairs, the iBuyer will let you know. They will deduct the repair cost from your net proceeds, so you won’t have to pay anything out of pocket.
Step Four: Choose Your Closing Date
Once the repairs are all sorted and out of the way, you get to select your closing date. You can move out as soon as 14 days or as late as 60 days; the decision is yours. Once you close on your home, you receive your payment within a matter of days.
Best Mortgage Forbearance Alternatives
Is mortgage forbearance a good idea? That is a question that only you can answer based on your current financial situation. If you want to be able to sell your home as it is and move on to your next adventure, you may want to reach out to an iBuyer.
If you have considered all of your options and decided that selling your home was the best option, you should reach out to a reputable iBuyer now! Contact us now if you are ready to receive your free, no-obligation all-cash offer.