There is no free lunch folks

This pandemic has delivered a great deal of unwanted and in some cases unnecessary hardship to many households. While many major banks and servicers were quick to “come to the rescue” with forbearance options, there are a few things you should know before you take that assistance…

Most if not all of them will give you 90 days to suspend payments without any damage to your credit or any penalty. Sounds good, right? In month 4, however, all 4 months will become due. Now you might be asking yourself, as I did, how the heck is that a benefit? I mean, if I can’t afford one payment now, what makes you think I’ll be able to afford 4 of them in 3-4 months?! Therein lies the point…they’re trying to determine who truly needs the help, and who does not. In order to get those 3 payments thrown on the back of the loan, you will need to provide a mountain of documentation for consideration. If they determine that you couldn’t make your payments, they may put those three payments on the back…but there’s no guarantee of that. If you are rejected, you will need to make all the payments up right away.

Additionally, if you enter into a forbearance agreement, you will need to bring the loan current AND have 12 “good payments” once the forbearance period is over before you can qualify for a Fannie or Freddie refinance…which is where the majority of loans are sold to keep liquidity healthy. So if you had hopes of taking advantage of these great low rates right now, you’ll be out of the game for a year. Who knows where rates will be in a year, especially with the looming election.

Make an informed decision that’s right for you.