Can I get a new mortgage after forbearance?

April 28, 2022
Posted in Programs
April 28, 2022 derekevansteam

When times were tough during the height of the Covid-19 pandemic, many people were forced to enter forbearance agreements on their mortgages. If you’re reading this article, you probably already know what this entails, but for the uninitiated, forbearance means that you come up with an agreement with your lender to temporarily delay payments during times of economic crisis. Millions of homeowners opted for these plans during this time, but are now left wondering what the repercussions may be if they want to sell or refinance their home. In this article, we will assuage any fears you may have and explain what life after forbearance entails.

How long do I have to wait before I sell or refinance?

Your timeline for refinancing depends on these requirements after exiting forbearance:

Conventional loans: Must make 3 consecutive payments.

FHA: Must make at least 3 consecutive payments, but may take advantage of FHA Streamline Refinance to circumvent this. Must make at least 12 consecutive payments for a cash out refi. 

VA: With the VA IRRRL refinance program, there is no waiting period as long as the buyer can prove they are no longer in a dire financial situation.

USDA: Must make 3 consecutive payments after exiting forbearance. Loan must have originally closed at least 12 months prior to the time of requesting a refinance.

How to start the process of refinancing after forbearance

Step 1: Make sure you can afford a new loan. Before you move forward with refinancing, you want to make sure that it’s actually a good move and if you’ll be saving money. The best way to do this is to speak directly with an expert, which leads us to step 2 which is:

Step 2: Find a loan officer.

An experienced loan officer will be crucial for helping you navigate the refinance process. Contact us to get in touch with someone who can help!

Step 3: Complete a refinance application. 

In order to begin the process, you’ll need to submit an application with your information to determine the parameters of your loan. Submit your application with us here!

Can I sell my house in forbearance and buy a new one?

The short answer is yes, and the long answer is “it depends.” 

If your home is worth more than you owe, then you’ll most likely be able to sell your home after or even while still in forbearance.You will however still need to pay your lender any missed or deferred payments from the forbearance using the proceeds from the sale.

If your home is worth less than you owe, you will need to either be able to come up with the difference out of pocket, or proceed with a short sale OR a deed in lieu of foreclosure. The last two options will negatively impact your credit score, so you should avoid those unless absolutely necessary.

Have more questions?

Every person’s situation is different, and there are a variety of factors that will determine your next move in or out of forbearance. In order to get advice tailored to your circumstances, connect with one of our expert loan officers and they can help you figure it out!