by Maurie Backman | Updated July 19, 2021 - First published on Sept. 24, 2020
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If you're having a hard time paying your mortgage right now, you need to read this.
The coronavirus pandemic has hit countless Americans financially as the jobless rate remains high and working hours are cut left and right. If you're a homeowner struggling to keep up with your mortgage payments, you're no doubt aware that there could be serious consequences if you fall behind. For one thing, being delinquent on even a single monthly payment could cause a major drop in your credit score. And if you fall too far behind, you'll risk losing your home through foreclosure.
The good news, however, is that there's no need to let things get to that extreme. The bad news, though, is that many homeowners don't realize that they're eligible for relief, and may miss out as a result.
Secure access to The Ascent's free guide that reveals how to get the lowest mortgage rate for your new home purchase or when refinancing. Rates are still at multi-decade lows so take action today to avoid missing out.
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During the pandemic, homeowners are entitled to up to 360 days of mortgage forbearance. When your loan is in forbearance, you're excused from making payments, and you won't be reported as delinquent to the credit bureaus.
But forbearance isn't granted automatically -- you need to ask for it. And an estimated 1.06 million borrowers who are past due on their mortgages by at least 30 days are not signed up for forbearance, reports Black Knight. That means they're risking unfavorable financial consequences for no good reason.
As long as you have a federally-backed mortgage (like a VA or USDA loan) or a GSE-backed mortgage (a conforming loan backed by Fannie Mae or Freddie Mac), you're allowed to put your home loan into forbearance for 360 days. If you do so, your payments will be paused.
About 95% of mortgages fall into those categories, so there's a good chance you will be eligible. If you are, all you really need to do is call up your mortgage lender and ask for relief.
Of course, one thing you should know about mortgage forbearance is that it won't let you off the hook for those missed payments. You will need to work with your lender to make good on the payments you skip. But if money is particularly tight right now, you can request forbearance and at least get a temporary reprieve.
Another thing you should know is that you're allowed to make payments toward your home loan even if it's in forbearance. Or, you can make partial payments. For example, if you normally pay $1,200 a month to your mortgage lender but can only swing $600 a month right now, you're entitled to pay that $600 -- and you should, in fact, pay it so that you're less burdened financially once your forbearance period ends. Either way, be sure to find out how and when you'll be required to make up your missed payments so you don't end up with a massive bill that catches you by surprise.
Finally, if you ask for forbearance, you'll be granted an initial 180-day period. You're entitled to a 180-day extension on top of that, but you'll need to request that separately, so keep that timeline in mind.
There's lots of relief available during the coronavirus crisis, and if you own a home, you shouldn't hesitate to seek it out. The last thing you want to do is miss out on assistance, fall behind on your mortgage, and risk a world of financial repercussions if you can avoid it.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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