Many homeowners who pay a deferral agreement with their lender may ask themselves. Can I sell my home during forbearance? – The short answer is yes, you can. The term forbearance describes a period granted by your mortgage lender when your mortgage payments are temporarily suspended or reduced. A forbearance is a tool distressed homeowners can use to pay their mortgage and avoid foreclosure.
Selling your home during forbearance is possible. It can even be the right move. Many banks are willing to negotiate a forbearance period instead of repossessing a property. Banks lose money when they take back a house.
Can I sell my home during forbearance? It can be responded to easily.
Some homes have sufficient equity to cover the outstanding mortgage balance. In these cases, distressed homeowners have an open the door to solve their mortgage obligations by selling their houses and eventually acquiring another one.
Many myths are about selling a home during forbearance. Some believe buyers would take advantage of their situation and make offers under the market price.
Buying a house in forbearance is a transaction that involves some specific characteristics. The process will differ from a regular house sale because it depends on the actual amount of the home equity, your loan terms, the condition of the property, and the market.
You have plenty of options to sell your house, and stop questioning yourself, can I sell my home during forbearance?
A Brief View of Mortgage Forbearance
Forbearance is an agreement where lenders allow borrowers to temporarily stop making payments or reduce the monthly payment for a limited period. It is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.
These forbearance agreements are designed to be a short-term solution to help homeowners avoid foreclosures.
Example:
- If you are granted a 1-year forbearance period, you will not be required to make any payments during that time.
- Additionally, if you were granted a mortgage forbearance due to financial hardship caused by the coronavirus pandemic, you won’t face any normal repercussions, like penalties and damaged credit.
- Remember, you can still make optional payments during this time.
The right to apply for a forbearance plan was given as an emergency measure (enacted by the CARES Act) during the COVID-19 pandemic. However, that assistance has now ended, and many homeowners face the stark reality of having to make good on the back payments owed to lenders. For this reason, many distressed homeowners ask, can I sell my home during forbearance?
As of September 2021, according to BlackKnight, a U.S. mortgage data provider, around 1.5 million home loans were still in forbearance.
IMPORTANT: Forbearance is not the same as forgiveness. You are still 100% responsible for making up and temporarily skipping or reducing payments. |
Selling Your Home During Mortgage Forbearance
Can I sell my home during forbearance is the question.
According to data from the Mortgage Bankers Association, only 7% of homeowners who exited forbearance between June 2020, to October 2021 opted to pay off their loans by either refinancing their mortgage or selling it. The MBA estimates that by September 2022, 345,000 US homeowners were in forbearance plans.
Homeowners looking to sell their homes while forbearance should o consider the following points.
1. Your Home is Worth More than What You Owe
If the value of your home exceeds what you owe, you should be able to sell your home while in forbearance without any issues.
The primary difference over a normal house sale is the condition that you must pay the lender any missed or deferred payments from the sale proceeds.
To Sell During Forbearance If you’ve kept asking yourself, can I sell my home during forbearance? Your home’s equity guarantees a quick sale and the possibility of getting another property or downsizing if preferred. The equity would allow you to reduce your sales expenses. Take into account that as you fall behind on your mortgage payments, your balance will grow and erode the amount you can get by selling your home. Therefore, consider selling your home before a possible preforeclosure (the period after you defaulted and before a foreclosure officially starts). In this instance, time is your enemy, and you’ll want to move quickly. |
Better Off Home Buyers: Immediate Cash Purchase If you are looking for advice or have already determined that selling your home may be your best option, contact Better Off Home Buyers to get a fast cash offer on your home before your situation worsens. You could have your cash in only 7 days. |
According to mortgage experts, the up and downs of the real estate market in recent years mean that most borrowers in forbearance risk their equity by not selling their homes on time.
CoreLogic, a California housing data company, states that every borrower’s average annual equity gain is approximately $51,500.
However, that does not apply to every homeowner…
2. Your Home is Worth Less than What You Owe
While homeowners owe more to their mortgage than their actual market home price, selling their houses during forbearance is very complicated.
If you are in this situation and unable to pay the difference out-of-pocket between the mortgage balance and the home’s value, still, you can sell your home.
However, you need to be fully aware that the two options available to you to sell are, one, through a “short sale” or “deed in lieu of foreclosure” – and both may negatively impact your credit rating:
Short Sale
Sell your house for less than what you owe on the mortgage.
- If you don’t qualify or cannot get a loan modification, you may be eligible for a short sale, but you must get your lender’s approval.
- You may also be required to pay the difference between the sale price and what you owe.
Deed in Lieu of Foreclosure
You may face foreclosure if you cannot sell your home during forbearance through a short sale.
- With a deed in lieu of foreclosure, your lender becomes the property owner. Although this option can help you avert foreclosure, you may have to vacate immediately. If you sell your home through this modality to an investor, you can make arrangements to rent or stay in the property while you look for a place to move.
3. Other Options for Selling Your Home During Forbearance
You don’t need to suffer by thinking, can I sell my home during forbearance? There is more option to sell it, and you can take advantage of them.
- Refinance Your Mortgage: Refinancing means replacing your current mortgage with a new one to lower your interest rate or monthly payments.
- The best option for someone whose circumstances have changed and can no longer afford their old monthly payment.
- Loan Modification: Restructures your loan to lower payments and lengthen the total payment period.
- This alternative works for someone who can no longer afford their old monthly payment.
- Repayment Plan: This normally involves temporarily increasing your monthly payment (by adding installments to your monthly payment for a limited time).
- This option works fine for someone who has improved his financial situation since applying for forbearance.
- Deferral or Partial Claim: This option maintains your current monthly payment just as it is and moves the payments you missed to the end of your loan or puts the amount owed into an additional loan on the property (you are required to pay back the additional loan when you either sell or refinance your home.)
- This option is suitable for someone in a similar situation than they were in before forbearance and can pay their original monthly payment.
- Reinstatement: This option only accepts full payment. In other words, you pay the full balance in a lump sum.
4. What Happens When Forbearance Ends?
At least 30 days before your forbearance ends, your lender should contact you. If you don’t hear from your lender by the 30-day mark, don’t delay – make sure you get in touch with them.
Your lender is legally obliged to let you know the following:
- When your forbearance plan is officially scheduled to end.
- List and describe all of the available programs you qualify for, and
- refer you to at least one option for housing counseling services.
After reviewing all your choices, if you decide to sell your home, your lender should give you the mortgage payoff amount, which is how much you owe.
5. Selling Your Home during forbearance.
We hope you have found the answer to your question, can I sell my home during forbearance?
Many people wonder about the impact, if any, it may forbearance have on their future ability to take out a fresh mortgage.
Normally, forbearance harms an individual’s credit rating and can prevent someone from getting a new loan.
When lenders realize you are in forbearance, they may consider you high risk, and because of this, you may need to delay any future ownership plans.
Talk to a Housing Counselor. A HUD-approved housing counselor can help you weigh the pros and cons of selling your home during forbearance. You can find HUD-approved housing counselors by visiting the Consumer Financial Protection Bureau’s “Find a Housing Counselor” page. |
You can contact a realtor to sell your home. Real estate agents may help you but hesitate when they realize you are under a forbearance plan. You must be prepared to face a challenging situation once you hire a realtor. Typically, homes stay on the market between 91 to 180 days. And that is a lot of time for a homeowner that can not afford a mortgage.
The good news is that you can contact a real estate investor. Independent home buyers will buy your house quickly and work with you to pay the top price. You don’t need to pay for repairs, closing costs, or agent commissions.
Contacting a Professional Home Buyer
You can sell your home regardless of your situation during and after forbearance. At Better Off Home Buyers, we can make you an immediate cash offer for your house at a fair price, the whole process can take as little as 7 days, and you’ll receive the return on your house fully in cash.
Take into account that homeowners spend between 25 to 35% of their home market value on repairs, maintenance, advertising, agent’s commission, closing costs, and other expenses during the time they are waiting to sell their homes.
You can add to that 35% of your struggles during forbearance. Take your time to weigh the whole situation and decide what will be your best move. If you need to sell your house during forbearance, contact Better Off Home Buyers, and we will buy your house as-is. We can help you to get rid of your forbearance plan.
Simply fill out the short form below or dial our phone number directly.
You will receive a “no-obligation, no-pressure” cash offer for your property. Our home-buying process is transparent and easy to understand. We close in about seven days, but you can close on the date of your choice.
You could save thousands of dollars in outstanding mortgage payments, incurred fees, and loan interest by contacting us at Better Off Home Buyers today.