Gustan Cho The Mortgage Expert,
Publish On: December 7, 2023
This guide covers 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. In this article, we will discuss and cover qualifying for a home mortgage after forbearance under the CARES ACT. After Forbearance under the CARES ACT is different and more forgiving than a standard mortgage forbearance. In the following paragraphs, we will cover qualifying for a home mortgage after forebearance.
Does Home Mortgage After Forbearance Affect Refinancing?
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
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.
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How Does Home Mortgage After Forbearance Work
If you have taken a mortgage forbearance, it means you have temporarily paused or reduced your mortgage payments due to financial hardship.
Once the forbearance period ends, you’ll need to work with your mortgage servicer to resume regular payments and address any missed payments.
We will explain the general steps to on getting a forbearance. Reach out to your mortgage servicer before the forbearance period ends. Discuss your financial situation and inquire about the available options for repayment. Mortgage forbearance doesn’t eliminate the need to repay missed payments. You may have several options for repayment, including:
Paying Back The Arrears Housing Payment Balance of the Home Loan After Forbearance
Paying the total amount owed in a single payment. Adding a portion of the missed payments to each monthly payment until you are caught up. Adjusting the terms of your loan to make it more manageable.
ake a close look at your current financial situation. Consider creating a budget to ensure that you can comfortably afford your mortgage payments moving forward.
Adding the missed payments to the end of the loan or creating a separate second loan that is due when you pay off your first mortgage. Some government-sponsored programs or assistance programs may be available to help homeowners who are struggling. Check with your mortgage servicer or a housing counselor to see if you qualify for any special assistance.
Monitor Your Credit During and After Forbearance
Keep an eye on your credit report to ensure that it accurately reflects your mortgage payment history. If you faced financial hardship due to the COVID-19 pandemic, there were measures in place to protect credit scores during forbearance, but it’s still a good idea to check.
Keep open lines of communication with your mortgage servicer. If you’re facing ongoing financial challenges, it’s crucial to let them know. They may be able to provide additional assistance or offer different solutions.
It’s important to note that specific details and options may vary depending on your mortgage servicer, the type of loan you have, and any applicable government regulations or assistance programs. Be proactive in addressing your mortgage after forbearance to avoid potential issues and find a solution that works for your financial situation.
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Guidelines on Home Mortgage After Forbearance
Under a traditional home mortgage after forbearance program, lenders will require a one-year on-time mortgage payment history after forbearance. However, mortgage agency guidelines on home mortgage 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 Home 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.
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.
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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 Home Mortgage After 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. 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 Home Mortgage After Forbearance
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. 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.
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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, 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.
How Can I Qualify For a New Home Mortgage After Forbearance
Homeowners who had a home mortgage after forbearance and need to qualify for a new mortgage, please contact us at Gustan Cho Associates at 800-900-8569. Or text us for a faster response. Borrowers can email us at gcho@gustancho.com. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.
Gustan Cho Associates has a national reputation of not having any 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.
