THE TRUTH ABOUT FORBEARANCE
3 things to consider about forbearance, before you take action:
Forbearance Facts and what you should consider. We have been receiving several updates from our loan officers in the Phoenix Real Estate Market. Below is some information they have shared.
1. A forbearance agreement is actually a form of loan default, like “kicking the can down the road”. Due to a temporary hardship this allows you to make a reduced payment (or no payment at all) during the terms of the forbearance. Although according to the CARES Act a servicer may not require proof of hardship, this program is not designed for you to take if you are able to make your payments.
2. While the forbearance won’t affect your credit score, it will still be on your credit profile. This means it could be the reason you are denied a mortgage in the future, whether a purchase or a refinance of your current mortgage, or only be offered a higher rate.
3. Your payments are not just tacked on to the end. While this is a possible scenario, this deferment is not the usual process. Instead, it is more likely your missed payments will be due at the end of the forbearance period, in either a lump sum or possibly spread out over a longer timeframe (such as a year).
If you’d like to read more about forebearance options, check out this great article from Bloomberg: