As a homeowner here in Texas, you’ve likely heard about the term “forbearance.” It can be a way to lessen the financial impact of your mortgage for a short period of time. However, it does come with some costs. In this post, we’re going to look at what forbearance means and how it impacts Texas homeowners who are looking for mortgage relief.
What is Forbearance?
Forbearance is the temporary reduction or deferment of your mortgage payments by the lender. During this time, they will also waive any late fees as you recover from your financial hardship. As foreclosure protections expire, many homeowners are using forbearance from their lenders to stay in their homes. However, the process can vary from lender to lender, so it is important to understand the terms of the agreement and your responsibilities once the time is up.
Setting the Right Terms
Because each lender operates a little differently, it can be difficult to determine what to expect from one to the next. Before making an agreement with your lender, make sure you have a clear understanding of the terms of the deal. Make sure to get in writing: how long the forbearance period will last, when the payments will be due, and if they will reverse or waive any late fees.
The Short-Term Impacts
Mortgage forbearance can be a solution for those dealing with a short-term financial setback. This could be something like the home needing a repair or a can not working correctly. By reducing their financial burden through mortgage forbearance, homeowners can get back on their feet, picking up on their loan where they left off.
The Long-Term Impacts
Many people avoid mortgage forbearance because they are worried it will damage their credit. In most situations, mortgage forbearance won’t adversely affect your credit score. However, if you are delinquent on payments before going into forbearance, this will be noted on your report. Forbearance doesn’t often have many long-term effects, unless the balance of the waived payments becomes due all at once.
How to Claim Mortgage Forbearance in Texas
Most lenders will require you to submit your request for forbearance in writing. The CARES Act made forbearance available to millions of Americans who struggled during COVID. That said, there are other hardships in which a homeowner would qualify for forbearance. Every lender works a little differently and will have different requirements for their forbearance program.
Alternatives to Forbearance
Filing for mortgage forbearance doesn’t make your payments go away. It only holds off the inevitable, giving you a chance to get caught up. In some situations, this isn’t feasible. For homeowners who anticipate they will continue to struggle financially after the forbearance period is up, selling the property may be a better choice. You can list the property, clean it up and make the needed repairs. Or you can work with a trusted buyer to sell the house as-is. Either way, it may not make sense for you to hold onto the property any longer. Lone Star Home Buyers of Texas is ready to help you find the solution that is best for you!