At the height of the COVID scares, back in February and March, when the stock markets where crashing and businesses were closing for undefined amounts of time, many homeowners across the country found themselves in emergent and dire financial situations.
There were a large number of homeowners opting into forbearance plans offered by the servicer of their current mortgage loan. Forbearance allowed for payment relief to help get through rocky financial situations brought on by unexpected circumstances resulting from the effects of the pandemic. For some home owners, it allowed them to keep a firmer financial footing or even helped to build a bridge to re-employment.
Now that some of those homeowners that took part in forbearance have begun to adjust and somewhat recover into a new normal and more solid financial situation, they are wondering if they are eligible to take advantage of the historically low-interest rates and refinance their home.
This is a good question: Can a borrower refinance when they have a record of forbearance or deferral on their current mortgage loan? Let’s take a look at conventional or conforming loans and what would need to happen to qualify for a refinance when you have just come out of a special payment plan on your loan.
Qualifying for a Conventional Loan Refinance After Forbearance
If you were currently or are currently under a forbearance plan and have not missed any payments on the loan, you must provide physical evidence of payments being made to the terms of your forbearance loan agreement AS WELL AS have paid in full any payments that were deferred.
The pay-off of the new refinance loan cannot include paying funds that are due because of forbearance.
If payment was missed but rectified and all payments brought to a current status before filling out a refinance application, then proof will need to be provided that the loan is up to date in all payments and no back payments will need to be made to pay off the loan.
If you missed a loan payment and made up for that payment after filling out a refinance application, proof will need to be made that the loan is current AND the funds used to make that/those payment(s) will need to be verified. In simpler terms the lender will want to see where the money came from to make the payments to bring your current loan to an up-to-date and healthy status.
If there is a plan for deferral of payments on your loan, a copy of the written agreement issued from the loan servicer will need to be provided, and at least three consecutive payments following the start of the agreement will need to have been made with provided proof they were made. In this scenario, the pay-off of the current mortgage can include deferral payments not yet paid in full.
So the answer to the question above on qualifying for a refinance after forbearance, yes it is possible to refinance a conventional loan and take advantage of today’s low-interest rates.
Contact me at any time for more information on available mortgage options in Mission Viejo and California right now. I am here to help find the best options for you.
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