August 13th, 2014 9:42 AM by Jackie A. Graves
Knowing you may lose your home because you
can’t keep up with the mortgage payments is a terrifying prospect. And if your
setbacks are just temporary, it can be even more daunting.
After all, your lender won’t wait for you to
get back on your feet, or will they?
If you’re experiencing a hardship and can’t
make your monthly mortgage payments, your lender may agree to a loan
forbearance as an alternative to foreclosure.
Here’s how it works.
The Basics of Loan Forbearance
A loan forbearance is a temporary solution to
help you overcome financial setbacks without losing your house or causing
severe damage to your credit rating.
Depending on your lender and your financial
situation, a loan forbearance will either eliminate your mortgage payment all
together or lower the amount you have to pay each month for a set period of
Eligibility for Loan Forbearance
Not everyone qualifies for a forbearance.
Generally, you must have experienced a temporary financial hardship:
Temporary cut in job hours or pay
Family emergency such as a death or a major
Your lender will require documentation to
prove you’ve experienced this setback. This can include the following:
Proof of current income
A letter from your employer proving a lay off
or reduction in hours
You may also need to work with your lender to come up with a plan for overcoming your
financial difficulties, including how long you’ll need to recover before you
can start making full payments again.
Once your lender has this information,
they’ll determine a length of time for your forbearance as well as the amount
of payment you’ll need to make each month, if any.
A forbearance doesn’t forgive the debt
entirely. After the period ends, you’ll have to repay the amount you missed.
There are several ways to repay:
Reinstatement: you pay the entire amount
Repayment plan: a specific amount is added to
your monthly mortgage payment until you repay the forbearance.
Loan modification: the amount due is tacked
on to the end of your mortgage loan, increasing your mortgage term.
Your lender will include your repayment terms
with your forbearance plan. Make sure you’re comfortable with the future terms
before agreeing to the temporary relief.
Making a Loan Forbearance Work For
A loan forbearance can keep you from losing
your home and is much easier on your credit history than a foreclosure—but the
program only works if you act quickly. Contact your lender while you’re still
current on your mortgage payments to discuss your options.
Once you’re in a plan, be prepared to start
repaying per the terms of your agreement. If you can’t turn your financial
hardship around before the end of your forbearance, your lender may agree to an
However, the key—again—is to act quickly. The
sooner you communicate with your lender, the better the results will be for you
and your ability to keep your home.
By: Angela Colley | To view the original article click here