Given the pandemic, one of the questions we have been asked a lot is, “Can I sell my house while in forbearance?”
The Covid pandemic brought with it millions of homeowners applying for mortgage forbearance. While several of the pandemic-related forbearance programs are done accepting new requests, there are still a lot of homeowners in forbearance.
So, if you’re wondering what your options are and if you can sell your home in forbearance, read on. We will walk you through the answer.
What Is Mortgage Forbearance?
A mortgage forbearance is a way to receive financial help during a hardship from your lender by reducing or pausing your mortgage payments for a set period of time while you try to regain financial stability.
Forbearance agreements aren’t automatic. It must be requested from your lender. However, during the pandemic, most requests were granted without a requirement of proof.
In fact, the majority of homeowners were eligible for the financial hardship forbearance programs offered by the CARES act.
Even though payments are paused or reduced, they aren’t forgiven. You will still owe the amount unpaid.
Once your forbearance period ends, you will owe the unpaid amount, plus interest, and in some cases, fees.
When Will CARES Act Forbearance End?
Most forbearance agreements are likely over or are going to end in 2022.
For example, if your mortgage is backed by Fannie Mae or Freddi Mac, it’s possible for you to be in forbearance until August 28th of 2022. Assuming, you requested forbearance on the last eligible day in 2020.
Those with a HUD, FHA, VA, or USDA loan, your forbearance has likely expired. A majority of them were set to expire by the end of 2021.
While these programs are over, it’s possible to request an extension of forbearance from your lender.
However, requesting forbearance will be more difficult and you will need to provide proof of financial hardship. A request for forbearance is going to be up to the lender and evaluated on a case-by-case basis. It won’t be automatically granted like it was during the pandemic.
Can I sell My Home in Forbearance?
If you’re still in forbearance or plan to enter forbearance and you’re wondering if you can sell your home in forbearance, the answer is yes.
Yes, you can sell a home while in forbearance. There is nothing in a forbearance agreement that says you need to stay in your home during the forbearance period.
Of course, you will still be required to pay back any missed payments that accrued during the period.
The amount owed from being in forbearance will be added to your total payoff amount at closing, plus unpaid interest and fees.
If you’re facing financial trouble and don’t see a pathway for being able to make your mortgage payment once your forbearance period ends, selling your home is an option to avoid foreclosure.
It’s possible to get your forbearance period extended if you prove that you’re selling your home. Lenders prefer to wait and receive a full payoff from the home than start the foreclosure process.
Speak to your lender, though. Again, forbearance isn’t automatically granted.
Do I Need A Short Sale?
It’s unlikely you will need to request a short sale from your lender. A short sale process is used when your home’s value is less than what you owe.
This was more common during the recession, but it does pop up every now and then. For example, it can happen to home buyers that purchased a home with minimum or no money down and the home didn’t appreciate enough.
For example, a VA loan with 0% down will have a mortgage amount the same value of the home at closing. If they went into forbearance and mortgage payments began stacking up, it’s possible for them to owe more than the home is worth.
A homeowner in this situation will need to request a short sale agreement from their lender. Given the current market conditions, most lenders will prefer to accept a short sale rather than going into foreclosure.
But, it’s a case by case basis. The best thing you can do is talk to your lender and work out a plan.
What Do I Need To Do To Sell A Home In Forbearance?
If you’re selling a home in forbearance, there isn’t anything additional you need to do.
Just be aware that you will be required to pay back all of the missed payments during the forbearance period.
Second, pay close attention to timelines, like when your forbearance period ends. Ideally, you would sell your home before your forbearance period ends or a lender accepts an extension while your home is listed for sale.
Either way, it’s important to move fast to sell the home. Get it listed quickly and close quickly.
Lenders will begin adding on late fees and penalties for missed mortgage payments. At this point, your credit score will take a hit and may make it hard for you to purchase a new home.
It’s a good idea to avoid a pre-foreclosure situation. You can sell your home the traditional route, with a real estate agent, or search for a company that buys homes to sell your home for cash.
Fortunately, we’re able to offer both options for our clients. We can close on your timeline.
Need to close fast because forbearance is ending and want to avoid foreclosure? We can buy your home cash. Looking to get the most equity out of the home while in forbearance? We can help you list your home through our foreclosure real estate agent services.
