Home Mortgage After Forbearance Agency Lending Guidelines
This Article Is About Qualifying For A Home Mortgage After Forbearance
Borrowers can qualify for a home mortgage after forbearance. The CARES ACT mortgage forbearance program is not treated the same as a regular forbearance due to not being able to afford monthly mortgage payments. The CARES ACT mortgage forbearance program is for homeowners who lost their jobs and/or had a reduction of income due to the coronavirus outbreak that hit the U.S. in February 2020. Qualifying For A Home Mortgage After Forbearance under the CARES ACT is different and more forgiving than a standard mortgage forbearance.
In general, qualifying for a home mortgage after forbearance under the CARES ACT is the same on government and conventional loans. Non-QM and alternative financing lenders have their own individual guidelines in qualifying for a mortgage after forbearance. Agency lending guidelines in qualifying for a mortgage after forbearance are the same on home purchase and refinance transactions. In general, lenders will require a one-year waiting period with on-time mortgage payments under a traditional loan modification/forbearance loan program. Under a traditional mortgage forbearance program, lenders will require a one-year on-time mortgage payment history after forbearance. However, mortgage agency guidelines after forbearance under the CARES ACT are much more forgiving. Borrowers taking up a home mortgage after forbearance under the CARES ACT can qualify with no waiting period up to a three-month waiting period after forbearance.
Lender Overlays On Mortgage After Forbearance
Lenders can have lender overlays for borrowers after forbearance. Lenders can treat a forbearance the same as a housing event such as foreclosure, deed in lieu of foreclosure, short sale. All lenders need to have borrowers meet the minimum agency mortgage guidelines of HUD, VA, USDA, Fannie Mae, Freddie Mac. However, each individual lender can have higher lending requirements called lender overlays that are above and beyond the minimum agency guidelines. Gustan Cho Associates has no lender overlays on qualifying for a mortgage after forbearance on purchase and/or refinance transactions. The bottom line is borrowers can qualify for a home mortgage after forbearance. The waiting period can vary from no waiting period to a three-month waiting period. The waiting period depends on the time it takes for the homeowner to pay back the arrearage of their missed payments during the forbearance period.
In this article, we will discuss and cover qualifying for a home mortgage after forbearance under the CARES ACT.
Qualifying For A Home Mortgage After Forbearance: What Is A Forbearance
When the coronavirus outbreak hit the United States in February 2020, thousands of companies completely or partially shut down their business operations. The close of business operations by companies has forced many to furlough or fire workers. Millions of Americans became unemployed which affect their ability to pay their monthly bills including their mortgage payments. The government created the CARES ACT mortgage forbearance program which gives relief to homeowners from missed mortgage payments during the COVID-19 crisis. Many homeowners took advantage of the CARES ACT mortgage forbearance program under the CARES Act.
How Forbearance Under The CARES ACT Work
Under the CARES ACT, homeowners can suspend making monthly payments during the financial hardship from the coronavirus outbreak. However, the missed payments need to be paid back. Mortgage loans backed by HUD, VA, USDA, Fannie Mae, Freddie Mac are covered under the CARES ACT mortgage forbearance program. In general, forbearance periods of up to 180 days are offered under the CARES ACT. However, extensions of another 180 days can be approved for homeowners needing additional time. Agency guidelines on qualifying for a mortgage after forbearance under the CARES ACT are still a learning curve for many mortgage companies. Borrowers may get conflicting reports from each individual lender. Some lenders who are not too familiar with the agency guidelines on a mortgage after forbearance may altogether not approve such loans until further notice.
Agency Guidelines On Mortgage After Forbearance
There is no waiting period required to qualify for a new mortgage for homeowners who took out a mortgage forbearance but have not missed any monthly payments during the forbearance period. Homeowners who have paid the missed payments in full at the end of the forbearance period will not have any waiting period in qualifying for a new mortgage. If the homeowner paid the missed payments all in one lump sum, the lender will need to verify where the funds came from. If it was a gift from a family member, then a gift letter that is provided by the lender needs to be completed by the donor.
Entering Into A Forbearance Repayment Plan
Borrowers can enter into a repayment period on the missed payments during the home mortgage forbearance period. If such repayment agreement exists, borrowers need to make three monthly payments that are agreed on the written repayment agreement to qualify for a new mortgage. Make sure you have everything in writing with your mortgage servicer. Once the forbearance period is over, make sure that you get the forbearance termination paperwork from the mortgage servicer. You should fully be clear and understand the terms of the forbearance, repayment agreement, and make sure the servicer does not report you delinquent on the three credit reporting agencies. Mortgage forbearance under the CARES ACT should not be reported as a derogatory credit item on your credit reports.
Homeowners who had a mortgage after forbearance and need to qualify for a new mortgage, please contact us at Gustan Cho Associates at 262-716-8151. Or text us for a faster response. Borrowers can email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. GCA Mortgage has a national reputation of not having any lender overlays on government and conventional loans. We are also experts on non-QM and alternative financing loan programs. Gustan Cho Associates has dozens of lending partnerships with non-QM and alternative financing wholesale mortgage lenders. We have a hybrid banking/broker business model. Gustan Cho Associates are mortgage bankers with the ability to broker loans as well. This is why many borrowers and realtor partners refer to us as a one-stop mortgage lending company.