Can I Sell My House While In Forbearance? | All You Need

Understanding Forbearance

Forbearance. It sounds like a medieval term, right? But it's not. It's about today, about homes, and about giving folks a breather when life throws curveballs. Let's break it down.

What's Forbearance Anyway?

Imagine you're juggling. You've got your job, your family, your mortgage payment, and then - bam! A wild pandemic appears. Suddenly, you're struggling to make your mortgage payments. Heavy right? That was the reality of many due to the coronavirus pandemic. If you qualify, you could have mortgage relief. That's where forbearance steps in.

In technical terms, forbearance is when your mortgage lender or loan servicer lets you pause or reduce their mortgage payments for a while. It's not forgiveness; it's a pause. It's important to note that forbearance isn't a free pass. The regular monthly payments missed will need addressing down the road.

Why Would I Need Forbearance?

Life's unpredictable. You might lose a job, face a health crisis, or encounter any unexpected hiccup that makes those monthly mortgage payments feel like mountains. Forbearance is a tool to help you avoid foreclosure when the going gets tough.

How Does Forbearance Work?

First, you’ll need to work with your mortgage company. You explain the situation, maybe it's job loss or perhaps it's something due to your health. They'll review your case, and if approved, you'll enter a forbearance period. During this time, you might pause or reduce their mortgage payments. But remember, forbearance doesn't mean those payments vanish. You'll need a plan for them once the forbearance period expires.

What Happens After Forbearance?

Once the forbearance period is over, you won't be expected to drop a lump sum. Instead, you and your lender will work out a plan. Maybe those missed payments get spread out over time, or perhaps they're tacked onto the end of your loan. The goal? To help you get back on your feet without toppling over.

Can You Sell Your House While in Forbearance?

Alright, let's get to the meaty bit. You're in forbearance, and you're thinking, "Can I sell my house?" Maybe you're looking to downsize, or perhaps you've got your eyes on a new neighborhood. Whatever the reason, let's unravel this puzzle.

The Short Answer?

Yes, you are able to sell your house in forbearance. But, and there's always a but, it's a tad more complicated than a regular home sale.

What About After the Sale?

Once you sell your house in forbearance, the forbearance period ends. You've used the sale to settle up with your mortgage lender, so the slate is clean. If there's any leftover debt, you'd need to work that out with your lender. Once that's squared away, any remaining funds from the home sale are yours to keep or use as you see fit.

What If My Home is Worth Less Than I Owe?

If you owe more on your home than it’s worth, you're in what's called an "underwater mortgage." In this case, you might consider a short sale. This means you'd sell your house for less than the mortgage balance. But heads up, this can impact your credit score.

Reasons for Going Into Forbearance

Life happens. Sometimes it throws curveballs that make keeping up with your mortgage payments a real struggle. That's where forbearance steps in, like a financial safety net. But what are the common reasons people opt for this route?

Job Loss

Facing unemployment is akin to encountering a formidable financial barrier. Suddenly, those monthly mortgage payments become towering obstacles. Forbearance can provide a much-needed respite as you navigate the job market.

Medical Emergencies

Health crises don't send invites. They just show up, often with hefty bills. If you're drowning in medical expenses, forbearance can be your life raft.

Divorce

Divorce isn't just emotionally draining; it's financially taxing too. If you're in the midst of a split, forbearance can help ease the monetary strain.

Natural Disasters

Hurricanes, wildfires, floods—you can't control Mother Nature, but you can control how you respond. Forbearance can offer some financial stability in chaotic times.

Pandemic

COVID-19 turned the world upside down, including finances. Many people opted for forbearance due to the economic uncertainty.

Career Change

Switching careers or starting a business? It's exciting but financially shaky. Forbearance can offer a safety net as you navigate this new path.

Education

Going back to school is an investment in your future but can be a drain on your present finances. Forbearance can help you focus on your studies, not your bills.

Temporary Hardship

Sometimes life's setbacks are temporary. A car breakdown, a home repair—these short-term financial hiccups can be managed better with a forbearance plan.

I apologize for the oversight. Here's the revised section with the asterisks removed:

Pros and Cons: Deciding to Sell Your House While in Forbearance

The decision to sell your house while in forbearance is like standing at a crossroads. Each path has its own set of ups and downs. So, let's weigh the pros and cons of selling while in forbearance to help you make an informed choice.

Pros

Financial Relief

Selling can free you from the burden of mortgage payments, especially if you're struggling to make ends meet.

Avoid Foreclosure

If you're in forbearance but foresee long-term financial issues, selling can help you avoid foreclosure.

Cash in Hand

A successful sale can provide immediate funds, which can be a lifesaver in tough times.

Market Timing

If the housing market is hot, you could walk away with a hefty profit, even while in forbearance.

Fresh Start

Selling can offer a fresh start, allowing you to downsize or relocate based on your current needs and financial situation.

Cons

Selling Costs

Don't forget about agent commissions, closing costs, and potential home repairs. These can eat into your profits.

Credit Impact

While forbearance itself doesn't hurt your credit, missing payments before or after can. This could affect your ability to buy a new home soon.

Tax Implications

Capital gains tax could apply, depending on how long you've owned the home and how much profit you make.

Emotional Toll

Selling a home is emotionally taxing, more so if the decision is forced by financial hardship.

Market Risks

If the market is down, you might have to sell at a loss, which could exacerbate your financial woes.

Deciding to sell while in forbearance is a complex decision that requires careful consideration of these pros and cons based on your unique circumstances.

Options To Consider

1. Short Sale

A short sale is like a Hail Mary in the real estate world. You sell your house for less than the mortgage balance. The catch? Your mortgage lender needs to give the green light. It's a way to avoid foreclosure, but it might leave a mark on your credit score.

2. Loan Modification

Think of this as a home loan facelift. You work with your mortgage servicer to change the terms of your loan. Maybe it's a lower interest rate or an extended loan period. The goal? To reduce your current mortgage payments and make them more manageable.

3. Deed in Lieu of Foreclosure

Sounds fancy, right? It's when you voluntarily give your property back to the lender. It's a last-resort option, but it's less damaging than a full-blown foreclosure.

4. Refinance

If you qualify, refinancing can be a game-changer. It's like swapping out your old loan for a shiny new one, hopefully with better terms. But tread carefully. If your home's value is way below what you owe, the option to refinance your mortgage might be a long shot.

5. Bankruptcy

Declaring bankruptcy can halt the foreclosure process, but it's a massive hit to your credit. It's a last-ditch effort, and you'd need to consult with a legal expert.

Impact on Credit Score

Your credit score. It's like your financial report card, and boy, does it love to keep tabs on you. So, when you're in forbearance or considering selling while in forbearance, what happens to this oh-so-important number? Let's break it down.

1. Forbearance Itself

Here's the good news: Entering forbearance due to federal laws (like those kicked in for the pandemic) shouldn't dent your credit score. But forbearance doesn't mean you're off the hook. Any missed payments before you entered forbearance? Those can leave a mark.

2. Short Sale

Going the short sale route? It can drop your score by a significant chunk, sometimes by 85 to 160 points. It's a hit, no doubt, but it's less of a blow than a foreclosure.

3. Loan Modification

If your lender agrees to modify your loan, how it impacts your score depends on how they report it. If they flag it as "paid as agreed," you're golden. If not, expect some credit dings.

4. Foreclosure or Deed in Lieu

These are the big bad wolves of the credit world. Both can tank your score by 85 to 160 points or more. And they'll haunt your report for seven long years.

5. Bankruptcy

It's the credit score apocalypse. Bankruptcy can slash your score by 130 to 240 points. It's a last resort for a reason.

Post-Forbearance Considerations

The forbearance period has ended. The dust has settled. But what now? Life after forbearance is a new chapter, and it's crucial to navigate it with eyes wide open.

1. The Payment Plan

Once the forbearance agreement ends, you won't be hit with a massive bill for all the missed or deferred payments. Phew! But you'll need a game plan. Whether it's a lump sum, a payment plan, or tacking it onto the end of your loan, you and your lender will need to hash out the details.

2. Refinancing

If your credit score is still shining and market rates are looking tasty, refinancing might be on the menu. It's a chance to snag a better rate and potentially lower those monthly mortgage payments.

3. Home Sale

Maybe you've realized that selling your home is the best move. Whether it's to downsize, relocate, or just start fresh, it's a significant step. Remember, if you sell your house in forbearance, there are specific considerations to keep in mind.

4. Credit Health

Your credit might've taken some hits during the forbearance period. It's time for some TLC. Regularly check your credit report, ensure all information is accurate, and work on building it back up.

5. Emergency Fund

If forbearance taught us anything, it's that life is unpredictable. Building an emergency fund can cushion future financial blows. Aim for three to six months of expenses. It's like a financial security blanket.

6. Stay Informed

Laws change. New relief options might pop up. Stay in the loop. Whether it's through your mortgage servicer, financial advisors, or trusted news sources, knowledge is power.

Alternatives to Selling Your Home While in Forbearance

So, you're on the fence about selling your home. Maybe it's memories, maybe it's the market, or perhaps you're just not ready. But if not selling, then what? Let's explore the alternatives.

1. Renting Out

Turn your home into an income source. Rent it out, cover your mortgage payment, and maybe even pocket some extra cash. It's a win-win, especially if you're not in a rush to sell.

2. Lease to Own

Not quite selling, not quite holding on. It's a middle ground where you lease your home with an option for the tenant to buy later.

3. Home Swap

Ever dreamt of living somewhere else, even if just for a bit? Consider a home swap. You live in someone else's house while they live in yours. It's a change of scenery without the commitment.

4. Refinancing

We touched on this earlier, but it's worth repeating. Refinancing can lower your monthly mortgage payments, giving you more financial wiggle room. It's like a breath of fresh air for your budget.

5. Home Equity Line of Credit (HELOC)

Tap into your home's equity without selling. A HELOC lets you borrow against your home's value. Think of it as a credit card, but with your house as collateral.

6. Home Equity Loan

Similar to a HELOC, but instead of a credit line, you get a lump sum. It's perfect for big projects or expenses. Just remember, your home's on the line, so borrow wisely.

7. Property Tax Relief

Struggling with property taxes? Some states offer relief programs, especially for seniors or those with disabilities. It's worth a look.

8. Reverse Mortgage

If you're 62 or older, this one's for you. Convert part of your home's equity into cash. It's a loan, but you don't pay it back until you sell, move out, or pass away.

9. Stay and Renovate

Maybe all your home needs is a little TLC. Instead of selling, consider renovating. Whether it's a new kitchen, an extension, or just a fresh coat of paint, sometimes love is all your home needs.

Selling Your House To Us

Navigating financial hardships and considering selling your home during forbearance can be a challenging journey. We understand that sometimes, speed is of the essence, and you may need to sell your house quickly to regain your financial footing. That's where we come in.

Whether you're looking to pay off missed mortgage payments, clear debts, or simply move forward, we're ready to work with you to make the process smooth and efficient.

Contact us today, and let's discuss how we can help you sell your house fast and take the next step toward financial stability.

Conclusion

Whew, what a ride! We've tackled everything from forbearance to credit scores, and from selling to not selling. The real estate world is a labyrinth, but guess what? You're not walking it alone.

Whether you're a seasoned homeowner or a newbie, the choices you make today will shape your financial landscape for years to come. So, what's your next move? Ready to make a decision that'll have you high-fiving your future self?

Don't just stand there at the crossroads—dive into our other in-depth guides, consult the pros, and take control of your destiny. Your dream home—or dream freedom—is just a click away. Let's make it happen, shall we?