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Falling behind on mortgage payments can happen to anyone. Whether it’s because of a job change, a personal loss, or some other financial reason, homeowners often wonder if it’s possible to sell houses in forbearance in North Carolina.
It’s absolutely possible to sell your house during a forbearance, but the question that needs answering is how to do that. What homeowners need is to educate themselves about what the forbearance period means and how to make the most of their situation.
What is forbearance?
Let’s start with the basics.
A mortgage forbearance happens when the loan servicer allows a homeowner to either reduce the amount of each monthly mortgage payment, or to stop monthly mortgage payments altogether. The forbearance plan is set up at the beginning, after the homeowner makes a forbearance agreement and creates a repayment plan with the mortgage lender.
These payments aren’t forgiven and they aren’t erased – the homeowner still owes that money on the house while in forbearance. Instead, these payments are either folded into the loan and repaid over time, or they’re paid when the home is sold. The terms of repayment are up to the loan provider when the homeowner approached them to request forbearance.
In North Carolina, homeowners have the option to sell their home during forbearance, thereby catching up those missed payments. It’s possible to sell a home even when there has been a loan modification. Keep in mind, what the mortgage holder most wants is to recoup their investment.
You are not alone in being behind on a mortgage payments
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Almost half a million Americans are in mortgage forbearance, according to the Mortgage Bankers Association. If you’re one of them, you might be considering whether you can sell a house during forbearance.
Selling your home while in forbearance is absolutely a choice. Most homeowners who find themselves in this situation don’t sell their house. In fact, more than nine out of ten homeowners hold onto their home instead of selling in this situation.
If there’s the means to catch up on your mortgage, whether it’s through dipping into savings to make a lump sum payment, pulling money out of retirement, leveraging a good credit report to borrow, or exploiting an additional source of income, borrowers typically find a way to get back on track before the forbearance period ends.
That’s not always the case, though. Oftentimes, people get behind on their mortgage in North Carolina because of factors that are out of their control. Delayed payments can become missed payments, especially in the event of a job loss where the borrower can no longer afford the monthly payments.
Three key things to know when you’re underwater and want to sell
When you owe more on the mortgage than the home’s value, it’s more challenging to sell, but it’s not impossible. Underwater mortgage holders in North Carolina have options. These are beyond the usual home sale methods, but they’re viable nonetheless.
- Research your situation
This is one of those moments in life that you want to become as much of an expert on your situation as possible.
What is the current housing market like?
In recent years, it’s been a seller’s market, so you’ve got a good chance of getting a fast sale on your property. In other kinds of real estate market situations, you might have a very hard time getting an underwater home sold in North Carolina.
Your lender will have a good understanding of what the current market trends are as well. They’ll know whether or not it’s likely that someone will pay the amount you owe on the mortgage balance, and the lender will adjust their offerings accordingly.
How much do you owe on your home, exactly?
This will mean calling the lender and getting a breakdown of exactly what you owe and what you’re going to owe at your projected closing date. If your home falls out of forbearance and into default before you get to the closing table, what will be the final amount owed?
Understanding exactly what you owe will let you know exactly what to ask for from a potential buyer. If you owe more than your home is worth, you’ll have to work out how to pay that balance back to the lender. In some situations, it’s possible for the loan servicer to forgive accrued fees when this is the case. This is called a short sale, and that’s the terminology you should use when you talk to your lender.
- Research your rehab options
As the forbearance period comes to an end, homeowners have several options. The CARES act increased the amount of eligible time for a forbearance to 18 months. It might be possible for you to extend your forbearance thanks to this new law. Financial products available vary based on the time that a loan entered forbearance, the negative activity on the loan, and the proximity to foreclosure.
Talk to your lender about a loan modification, which will restructure the loan and potentially can lower your monthly payments by lengthening your loan.
If you can make it work, you can reinstate your loan by paying back the entirety of the owed funds in a single lump sum.
- Research potential buyers
You have the freedom and flexibility to sell your home in North Carolina, no matter what condition the mortgage is in. It’s important to understand that you always have this option.
Selling your home is your right, no matter our current financial situation or issues you may have with your credit. Even if you don’t have equity in the home, selling your home to a cash buyer for less money could still be the smartest option.
Many borrowers start reaching out to potential buyers before the forbearance ends, which can lower the amount of late fees on the home loan. Companies that buy houses regularly will know how to support you through paused payments, as well as what loan terms will hold up the process.
Selling a home to a real estate investor, even after you’ve been granted forbearance, can help to avoid foreclosure. Any mortgage servicer in North Carolina is going to be open to a homeowner experiencing financial hardship to sell your house. If you’re not able to make regular monthly payments, it’s better for everyone involved to sell your home.
The effects of selling during forbearance
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Selling a home during forbearance or even refinancing a home during forbearance can have an effect on your ability to buy another home or to refinance a current property.
Homeowners who have loans that are held by Freddie Mac or Fannie Mae have to wait for three months after a forbearance is over before they can buy again. In the case of refinancing, the loan must be current for three consecutive months before refinancing is an option. The total of the forbearance owed must also be repaid before refinancing or purchasing a new home.
One big hitch in all of this is the amount of interest that accrues throughout the process. In some cases, that interest can come back in the form of a credit from lenders. That money is not part of the principal owed, and borrowers can find themselves owing so much in fees and interest that it pushes them towards the brink of foreclosure.
This is the moment for borrowers to negotiate hard with lenders to prevent things from progressing into the foreclosure process. A lender reviews the terms of the loan and can reduce the amount to a partial claim. This is particularly true for loans that were financed at a high interest rate.
Mortgage lenders don’t want to send a home into foreclosure, but if a repayment plan isn’t followed, they’ll have to. Foreclosure is the final step and the worst outcome for everyone involved. Following the forbearance plan, even up until a home is sold, is an important part of preventing negative credit reporting and preserving the ability to borrow again.
Determine your next steps
Whatever you decide to do, whether it’s to sell your house or try to catch up on the missed payments from a forbearance, know that you have lots of options. Selling a house while in forbearance can alleviate a lot of the financial hardship.
Review your options for keeping your home or extending the process to allow you to find the right buyer. Keep in mind that the CARES Act changed the parameters that a borrower has to salvage their credit and stay in their home. Those provisions come from the federal government, so they apply to all people in North Carolina, as well as to homes in the rest of the country.
It’s entirely possible to sell your North Carolina home in forbearance, but how that process goes will be determined by how much you owe, how much equity you have in the property, and what buyers you’re able to connect with. Keep researching your possibilities! It’s possible to make this process work for the lender, the buyer, and you, the homeowner.