Applying For Mortgage Forbearance: A Step-By-Step Guide

The COVID-19 pandemic has impacted the financial situation of many homeowners, making it difficult to keep up with mortgage payments. In response, the government introduced a forbearance program to provide support. Forbearance is a temporary pause or reduction in loan payments, typically in the case of mortgages or student loans. It is important to note that forbearance does not mean that payments are forgiven or erased – you are still obligated to repay any missed payments. If you are experiencing financial hardship, you may be eligible for forbearance. This paragraph will discuss the steps to apply for mortgage forbearance.

How do I apply for mortgage forbearance?

Contact your lender

Contacting your lender is the first step in applying for mortgage forbearance. This is not an online process, so you will need to contact your lender by phone, email, or through an online form. It is important to do this as soon as possible, as forbearance requests must be received at least five business days before the beginning of the forbearance date.

When you contact your lender, you will need to provide your loan account number, give the reason for your financial difficulty, and mention a timeline for when you expect to recover your finances. Your lender may also request documentation and information. Remember that you have a higher chance of being approved for forbearance if you have a consistent repayment history and responsible credit behaviour.

If you are a Rocket Mortgage® client, you can sign in to your Rocket Account and fill out an Application For Success. A representative will then contact you to discuss the mortgage relief options available.

Before agreeing to a forbearance plan, be sure to ask about the terms and consequences to make an informed decision. For example, you should prepare for the possibility of higher monthly payments and a higher interest rate after the forbearance period ends.

Provide account number

To apply for mortgage forbearance, you will need to provide your account number. This is because your mortgage servicer will need to access your account to assess your eligibility for forbearance. Your mortgage servicer is the company that you send your mortgage payments to each month. This is the company you need to contact about your mortgage assistance options.

If you don't know who your mortgage servicer is, you can find this information in several ways. Firstly, you can look at your monthly bill or mortgage statement for the company's contact information. You can also call the company that receives your monthly mortgage payment, whether that is your original lender or a mortgage servicer. If you have a mortgage loan that is not backed by a federal agency, you can search the Mortgage Electronic Registration Systems (MERS) website to find your servicer's name.

Your servicer should help you identify alternatives that may be available to you given your specific circumstances. You can ask to speak to a specialist at your servicer about options for mortgage assistance.

Give reason for financial difficulty

When applying for mortgage forbearance, you will need to explain your situation and the reasons for your financial difficulty to your mortgage provider. This is because qualification requirements for mortgage forbearance vary by lender, and they will need to assess your situation to determine the best plan available for your needs.

Financial hardship can take many forms, and it is important to be honest and forthcoming when explaining your circumstances. For example, you may have lost your job, or your income could have been impacted by the cost-of-living crisis, an illness, or an injury that has prevented you from working. Alternatively, you may have experienced a significant increase in your outgoings due to a new child, a dependent relative moving in, or an unexpected emergency expense.

Other reasons for financial difficulty could include a natural disaster, such as a flood or fire, which may have damaged your home and incurred unexpected costs. The COVID-19 pandemic also caused financial strain for many, whether that be due to illness, stress, unemployment, or other pandemic-related factors.

Remember, there is no shame in asking for help, and it is always best to be proactive and take the necessary steps to apply for mortgage forbearance if you need it. Contact your mortgage provider to explain your situation and determine the options available to you.

Ask about terms and consequences

When asking about the terms and consequences of mortgage forbearance, here are some key points to consider and questions to ask:

Understand the Basics: Start by gaining a clear understanding of what mortgage forbearance entails. Forbearance is an agreement with your lender to temporarily pause or reduce your mortgage payments. Ask about the specific terms of the forbearance, including the duration (how many months it will last) and whether it involves a full pause or a reduction in payments.

Consequences of Forbearance: Inquire about the potential consequences of entering into forbearance. Ask if there will be any fees, penalties, or additional interest accrued during the forbearance period. Inquire about any negative impacts on your credit score or credit report as a result of the forbearance agreement. Understand if there are any long-term effects on your mortgage, such as an extension of the loan term or adjustments to your interest rate.

Repayment Options: Discuss the repayment terms after the forbearance period ends. Find out if the missed payments will be added to the end of your loan, if you'll need to make a lump-sum payment, or if there are flexible repayment plan options. Ask about the potential consequences if resuming regular payments or repaying the missed amounts is challenging.

Impact on Loan Modification: If you anticipate needing loan modification in the future, ask how forbearance might affect your eligibility. Understand if entering into forbearance will have any impact on your ability to modify your loan terms or access other loss mitigation options later on.

Protection and Scams: Ensure you are aware of the protections available to you during the forbearance process. Ask about any applicable laws or regulations that govern the forbearance agreement and your rights as a borrower. Stay vigilant about potential scams and seek guidance from your lender or servicer about legitimate resources for assistance.

By asking these questions, you can gain a comprehensive understanding of the terms and consequences of mortgage forbearance, enabling you to make informed decisions regarding your financial options.

Prepare for higher monthly payments after the forbearance period

Mortgage forbearance is a short-term, cash-saving strategy that allows you to temporarily pause or reduce your monthly mortgage payments. This can be a financial lifeline for those facing unexpected financial hardship. However, it's important to remember that forbearance is not a long-term solution. Once the forbearance period ends, you will need to resume your regular mortgage payments, and you will be responsible for repaying the missed payments, which may result in higher monthly payments.

To prepare for higher monthly payments after the forbearance period, it is crucial to understand the options available for repaying the missed payments. Depending on your lender and the terms of your forbearance agreement, you may be required to repay the missed amount in a lump sum or through a repayment plan. A lump sum payment can be financially challenging, so it is advisable to discuss alternative options with your lender if this is not feasible for you.

One option to manage the increased financial burden is to spread out the missed payments over several months, adding an additional amount to your regular monthly mortgage payment until the deferred payments are settled. This approach can help make the higher payments more manageable by distributing them across a longer period. It is important to carefully review the terms and conditions of such a repayment plan to ensure it aligns with your financial capabilities.

Another strategy to cope with higher monthly payments is to extend the term of your mortgage loan. By adding the missed payments to the remaining principal balance and recalculating the monthly payments over a longer duration, you can reduce the amount due each month. However, this option should be carefully considered, as it may result in paying more interest over the extended loan term.

Additionally, it is essential to actively work on improving your financial situation during the forbearance period. This can involve reducing discretionary spending, increasing your income through side hustles or overtime work, or tapping into any available savings or investments. The goal is to create a financial buffer that can help you manage the higher monthly payments more comfortably once the forbearance period ends.

Frequently asked questions