First and foremost, before forbearance or foreclosure – talk to your lending institution! An open dialog with your lender may quell many problems before they happen; they are not there to scold or judge, just to help.
What is mortgage forbearance?
The simplified answer, according to consumerfinance.gov: forbearance is when your mortgage servicer or lender allows you to temporarily pay your mortgage at a lower payment or pause paying your mortgage. You will have to pay the payment reduction or the paused payments back later.
Forbearance is an option if you have a temporary situation that will be resolved over time. Some of these may include temporary loss of job; health issues; natural disaster. In July of 2020, 8.5 percent of all active mortgages were in forbearance. There are two very important things to know; this is not automatic, although you may qualify you need to apply before the situation has you in arrears; AND, forbearance will NOT show up on your credit report.
What Is Foreclosure?
Foreclosure happens when a borrower fails to pay their mortgage payments and the lender must repossess the home. Foreclosure can also happen when the homeowner fails to pay their property taxes or homeowners association fees. (https://www.quickenloans.com/blog/what-is-a-foreclosure-and-how-does-it-work)
Foreclosures are down from an all-time high that came after the recession-battered housing market of the late 2000’s. However, they still happen and for many they happen because the homeowner/borrow stops paying the mortgage and does not communicate with the lender beforehand to try to alleviate the problem.
What are the long-term effects of foreclosure?
Once a home is lost to foreclosure, the homeowner’s credit score could drop dramatically. According to FICO, for borrowers with a good credit score, a foreclosure can drop your score by 100 points or more. If your credit score is excellent, a foreclosure could reduce your score by as much as 160 points. In other words, the higher your credit score the more impact a foreclosure will have.
Typically, it will take three years or more of on-time payments to restore the credit score. If the foreclosure is an isolated event and the borrower’s credit is otherwise sound, consumers may be able to recover more quickly. It can take anywhere from three to seven years to fully recover.
What is important to note: a low credit score due to foreclosure can result in expensive interest rates and limited credit, making financial recovery difficult.
If you feel that you are in a situation where forbearance is not going to help and you do not want to go into foreclosure, now is the time to take advantage of the real estate market.
We are in a unique situation, a seller’s and buyer’s market. Sales and prices are at an all-time high due to the Covid-19 pandemic and people moving out of larger cities which is great for sellers and interest rates are at an all-time low which is great for buyers.
If you are interested in finding what your home is worth and if now is a good time to sell, reach out to me at almaxrealty.com/toni/
About Alexander Maxwell Realty and Toni Ann Perry:
Alexander Maxwell Realty offers its clients so much more than listing properties for some and finding a place to live for others. Our approach is truly unique; from customer service to branding and much more, we are far ahead of others in this industry. I have more than 30 years of experience as a caterer, and what I bring to this state-of-the-art real estate firm is my vast experience with client relations, professionalism, and solid work ethic.
In 2009 I received a Bachelor of Science degree in Organizational Leadership and Communications from Marist College and in 2016, a Paralegal Certificate from the same. In 2018 I joined NAPO (National Association of Productivity & Organizing) and have added Professional Organizer to my resume.
All of my education and experience gives me a unique skillset in helping you, your family and friends in just about any real estate needs. However, what I find great joy in is working with the seasoned individual in upsizing or downsizing their current residence and helping them in all aspects of such. Because of my fondness in this area, I have become a SRES (Seniors Real Estate Specialist) through the National Association of Realtors.