April 17, 2020
From the Desk of Mike Donoghue
The recent guidance from government officials regarding forbearance and mortgage payments sounds great but the reality is somewhat different.
First I will provide you with two examples that recently occurred.
A homeowner hears they do not have to make their monthly payment citing Covid-19 as the cause. They stop making payments and save the payments in the anticipation of buying a new house with the new lower rates. They come to us to get qualified and the credit report reflects “mortgage in forbearance”. This borrower is not eligible for a mortgage now or quite possibly for as long as a year.
Another scenario we see is borrower comes to us to refinance and their loan is currently in forbearance. They again are not eligible to refinance because they have shown they are unable to pay the existing mortgage.
The problem is the government never put into place “means testing” where the borrower would have to show hardship for forbearance. As a result people who have no legitimate hardship are taking advantage of what they perceive as a benefit.
If you are unable to pay your mortgage now then it is unrealistic to think that a bank is going to give you a new mortgage.
If you do not have a hardship and are otherwise capable of making your payments I cannot stress enough that you will be better served in the long run to make your payments. The stigma of forbearance could dwell on your credit report for 10 years and may affect rates and terms for other financing you are in need of. It could even affect the cost of your homeowners or auto insurance.
Here is the good news. In most cases, one late mortgage payment does not disqualify you from mortgage eligibility so if you have only missed one payment, you still have time to get back on track. Beforealre making any decisions please contact one of our Loan Officers or your REALTOR® to go over this. We’re here to help.
