What is forbearance? Should you apply for forbearance as a homeowner? Forbearance is the process of forbearing a responsibility such as a loan. Most people’s experience with forbearance comes from dealing with their college tuition, where getting a forbearance means you don’t have to pay the loan back until after graduating. More recently, though, more and more mortgage owners are seeking forbearance due to COVID-19.
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How you apply for forbearance is up to each individual bank, and most of them let you do it online. Whether or not you should apply depends on your situation. Do you truly need forbearance or are you looking to save some money? It could benefit you in either case. Usually, a forbearance term lasts anywhere from three to nine months.
There are several downsides to seeking forbearance that you should know:
- It could lower your credit score
- Your loan product won’t be current once it comes out of forbearance
- Banks have unrealistic payment requests—instead of adding it on at the end, they may want a lump sum
You can still seek forbearance if you haven’t lost your job, but the main takeaway is this: Get the facts before you commit to anything.
As always, if you have questions about this or any other real estate topic, don’t hesitate to reach out to me.