At Mortgage Biz of Florida, we hope you are staying safe in your home with family. If you are considered an essential worker, we thank you for your selfless service and dedication. In this time, many have been furloughed or laid-off from consistent employment. If really needed, there are assistance options for your monthly mortgage payments. The federal government has provided guidelines (while quite confusing or lacking full details) to mortgage servicers on how to deal with mortgage payments using a forbearance option in this uncharted COVID-19 climate.
Forbearance – This is the hottest topic in housing right now. The reality about a forbearance is, when the forbearance period ends (which will typically be between three-12 months), the missed payments become due. There are generally three ways to address those missed payments:
1) Pay the total amount at once (a lump-sum)
2) Enter into a repayment plan
3) Modify the mortgage terms to create a new affordable long-term payment
Math Example – the typical conventional mortgage payment is $1,200 with Taxes and Insurance. If you get a 3 month forbearance, your next payment is 4 months out. If you’re reading this, I bet you’re a bit of a math nerd so let’s do some algebra. If the typical conventional mortgage payment (PITI) is $1,200, solve for X after a 3 month forbearance:
Q: $1,200 x 3 + $1,200 = X
A: $3,600 + $1,200 = $4,800 due at month 4
Forbearance is not deferment. Read this again, please. Forbearance isn’t a payment plan. It’s zero payments with a balloon or more likely, other modification options down the road. It’s going to help some people but it’s overused and misleading in the media. Lenders and servicers comply with the guidelines issued by Fannie Mae, Freddie Mac and FHA/VA but we will take the brunt of explaining this to consumers so they accurately understand all their options.
PRO TIP – if you go into a forbearance on an existing loan, current guidelines from Fannie and Freddie say you ARE NOT ELIGIBLE to get a new conventional loan if they have deferred any payments because while credit suppression is applied, you are actually delinquent. The tip is that if you can pay your payment, pay it. This is an option for those that really need it.
ANOTHER CONSIDERATION – If you are still employed with enough equity in your home, consider a cash-out/debt consolidation refinance. This will help you put away money for a potential rainy day ahead while you continue to qualify for a refinance loan with your current employment.
Reach out to your Mortgage Biz of Florida team, we are here to help!