Navigating the Waters of Mortgage Forbearance and Home Sales
The economic turbulence of recent years has thrust mortgage forbearance into the spotlight as a critical lifeline for homeowners grappling with financial hardships. The unexpected loss of income can swiftly turn the dream of homeownership into a foreclosure nightmare. However, forbearance offers a temporary reprieve, allowing homeowners to pause or reduce their mortgage payments while they recuperate financially. But what happens when you’re in forbearance and considering selling your home?
The Essence of Mortgage Forbearance
Mortgage forbearance is essentially a “pause” agreement between the lender and the homeowner, providing a breathing space of up to 180 days, with the possibility of extension. This arrangement was particularly vital during the COVID-19 pandemic, offering relief to countless homeowners across the nation.
Selling While in Forbearance: Is it Feasible?
Yes, selling your home during forbearance is indeed possible and may sometimes be a prudent choice, especially if facing the end of your forbearance period without a clear financial recovery in sight. However, it’s crucial to acknowledge that any delayed payments during forbearance will need settlement upon the sale. The equity status of your home—whether it’s worth more or less than the amount owed—plays a significant role in this process.
The Financial Implications
Selling your house during forbearance doesn’t exempt you from repaying the accrued mortgage payments. If your home sells for more than the outstanding mortgage, the sale can cover the missed payments. However, if the mortgage outweighs the home’s value, a short sale or a deed in lieu of foreclosure might be your courses of action, though these can impact your credit score more severely than a regular sale.
Alternatives to Selling
Before rushing to sell, consider other forbearance exit strategies like extending the forbearance period, refinancing, loan modification, repayment plans, or a deferral. Each option has its eligibility criteria and implications on your future financial obligations and credit health.
Professional Guidance is Key
The complexity of selling a home during or after forbearance underscores the importance of professional advice. Housing counselors and real estate professionals can provide valuable insights into your situation, helping you weigh the pros and cons based on your unique circumstances.
When Behind on Payments
If you’re delinquent on your mortgage outside of a forbearance plan, selling the home remains an option, albeit with its challenges. The approach to take depends largely on the amount of equity in the home and the urgency of the financial distress.
Before the Mortgage is Paid Off
Selling a home before clearing the mortgage is common, but it requires careful financial planning. The sale proceeds will go towards paying off the remaining mortgage balance. Any surplus after the mortgage and sale-related expenses are settled becomes the seller’s profit.
In Summary
The decision to sell your house during forbearance should not be taken lightly. It’s a solution that can indeed sidestep foreclosure and its detrimental effects on your credit score, provided it’s approached with a clear understanding of the financial implications and available alternatives.
For homeowners considering selling their homes during forbearance, Smooth Closing offers a streamlined process to sell your house quickly and efficiently. Our team understands the complexities involved and can provide the guidance and support you need during these challenging times.
If you’re exploring the option to sell your house fast and wish to understand more about how forbearance might affect the process, Smooth Closing is here to help. Call us at (512) 368-9979 for a no-obligation consultation, and let’s explore your options together.