Mortgage in Forbearance? Act Quickly, You May Eligible Now!

If you’re a borrower who recently took advantage of forbearance plans, you won’t be penalized when it comes to getting a better interest rate, or even when you’re buying a new home.

If you experienced a financial hardship due to the coronavirus crisis, and temporarily suspended your mortgage payments, you’re still eligible to refinance your home mortgage loan this year, according to a recent announcement from the Federal Housing Finance Agency (FHFA).

Here’s what you need to know about refinancing your mortgage (while mortgage rates are at historic record lows).

New FHFA Rules Allow Borrowers in Forbearance to Refinance

Usually forbearance dings your credit report and lessens the chances of refinancing or purchasing anytime soon, the new rules give borrowers some leniency and allow them to refinance earlier with a shorter (or no) waiting period as long as certain conditions are met. Instead of the required 12 months of timely payments, once the forbearance period ends you just have to make on-time payments for three consecutive months in order to be eligible for a refinance. Mortgage refinance rates have recently reached historic record lows, so you should act quickly to refinance your mortgage.

To measure just how much you could save on monthly mortgage payments by refinancing now, let MortgageDepot crunch the numbers and compare the rates to see what multiple lenders are offering.

STEPS TO REFINANCING YOUR MORTGAGE

Making on time payments is enough to signal to your lender that your financial situation was a temporary and that you’re able to continue paying your mortgage payments post-forbearance. The new temporary policy has been put in place to clarify what happens once your forbearance period ends.

Many borrowers who enrolled in forbearance because of the impact of COVID-19 related challenges, but wound up remaining current on their repayments. Lenders felt that, that shouldn’t have an effect on borrowers ability to qualify for a refinance or new home purchase. Another added plus, though not a requirement: if you pay the full amount missed during the forbearance right after you reinstate your mortgage, there’s no waiting period to refinance at all.

This new policy applies to mortgages back backed by Fannie Mae and Freddie Mac. Loan applications dated on or after June 2, 2020, are eligible, but the policy doesn’t apply to high loan-to-value (LTV) refinance loans. The mortgage authorities noted that they are not considering payments missed during COVID-related forbearance that have been previously resolved, to be historical delinquencies.

Why You Should Refinance After Forbearance

A refinance has been one of the ways borrowers have been using to save money during the coronavirus. It means paying off your original home loan and replacing it by creating a second one with a much better interest rate. The process is similar to your first mortgage in terms of documentation needed and the approval process.

Interest rates set another recent record low with the 30-year fixed rate dropping as low as 3.37 percent. These super low rates should be music to your ears if you’re looking to refinance because that means more money in your pocket. Use Credible to see just how much money you can save by refinancing today.

WHEN IS THE BEST TIME TO REFINANCE YOUR MORTGAGE?

When you refinance your mortgage, resulting in lower monthly payments, your loan will be paid off much faster. And if you have an adjustable-rate mortgage, refinancing allows you change to a fixed-rate one so that you can lock in your lower interest rate for the entire life of the loan. This alleviates having to worry about fluctuating rate increases.

The FHFA regulators will continue to closely monitor the impact of the coronavirus and will continue to update their policies on forbearance and refinancing as needed.

Be Sure to Compare Rates

Be sure to compare mortgage-refinancing rates available from various lenders. Too many borrowers make the mistake of not doing enough research and going with the first lender they see. This is a mistake that can potentially cost you, the homeowner thousands of dollars annually.

If you’re worried about your credit score or not sure if refinancing is a good idea right now, don’t just go by what you may have heard in passing. Take the time to find out what’s fact versus fiction when it comes to mortgages and refinancing.

Contact MortgageDepot for an easy way to compare mortgage-refinancing rates from a variety of lenders simultaneously and even get pre-qualified. Our Mortgage Loan Originators can assist you in this process without affecting your credit score.

MORTGAGE RATES HIT NEW RECORD LOWS —REFINANCING NOW COULD SAVE YOU MONEY

Refinancing Bottom Line

COVID-19 is making it incredibly tough for some homeowners to maintain their mortgage payments, and many have enrolled in forbearance programs. In fact, the June 1 report from the Mortgage Bankers Association (MBA) noted that just over 4.2 million homeowners are now in forbearance plans. The total number of loans now in forbearance has grown to 8.46 percent.

And data from Black Knight Financial showed that 3.6 million homeowners were past due on their mortgages as of the end of April, representing the largest number of mortgage delinquencies since January 2015.

This goal is to ensure that borrowers are not penalized for the economy’s financial setback and “allows homeowners to access record low mortgage rates and keeps the mortgage market functioning as efficiently as possible,” explained Mark Calabria, director of the FHFA. So, if you’ve been carefully watching those interest rates drop and you’re currently in forbearance, just be sure to keep up with your mortgage payments once you resume making payments.