Qualifying for a Loan after Mortgage Forbearance
In March when the COVID-19 related shut-downs began, the federal government and states enacted policies to protect homeowners experiencing difficulty in making their mortgage payments due to the coronavirus. Known as mortgage forbearance, these options protected homeowners whose income or ability to pay their mortgage was impacted by the COVID-19 crisis from damaging their credit score and the risk of foreclosure.
As many of these mortgage forbearance programs are coming to an end and homeowners who took advantage of the programs are now looking to obtain a new home loan on a purchase or refinance their existing mortgage.
Several conditions apply to homeowners previously enrolled in mortgage forbearance programs before they are able to qualify for a new loan or to refinance their existing mortgage.
- Mortgagees who inquired about forbearance and were automatically put into forbearance but never stopped making their payments must notify their mortgage holder to have their forbearance canceled before they are able to refinance or apply for a new loan. It is important to make sure all payments have been applied to their loan and their loan is showing current.
- Mortgagees who went into forbearance and have completed their forbearance plan must show proof that they have made at least three on-time payments to be eligible for a new loan. A new credit report will be run to show that the loan is no longer in forbearance.
- Mortgagees who utilized the forbearance programs because their income or ability to pay had been impacted by the current COVID-19 crisis, must now prove their income has stabilized in able to qualify for a new loan or to refinance their current loan.