F Words: Should I show someone a home if they are in Forbearance? what if they are furloughed?
The answer to both questions above is probably “NO”. F words in the mortgage world are typically bad. The Biggie of course is Foreclosure- that causes a 7 yr waiting period for Conventional loans (unless part of a bankruptcy) and 3 year wait for FHA. For today I wanted to focus on the two Fs we keep hearing about during the pandemic: Forbearance and Furlough.
Forbearance means you have called your lender and said “I cant make my payment” We have had agents in our area showing clients homes who are currently NOT making the mortgage payment on their current home. Plain and simple- if you are not up to date on your current mortgage, we cannot lend you money on a new home. There is good news here. Fannie and Freddie have come out with guidance on the forbearance issue. If you requested Forbearance but have never skipped a payment, that is all good, and you can move forward as normally. If you did go into forbearance and missed payments, you can only move forward with another mortgage once you paid off the missed payments WITH YOUR OWN MONEY.. (no gifts). If you are making payments with a modified payment to catch up on missed payments- you can be eligible once you make 3 timely payments. If you skipped payments and have not caught up or done anything to catch up- you are not eligible for a new mortgage at all. These were straight from Fannie and Freddie- and the guides we will be following, Lenders have the option to be stricter than this and many have opted to add 90-120 days or more to Uncle Sam’s guidance. For GNMA (FHA, VA, USDA) the guidelines are currently a bit more strict since they have not come out with any new guidance on the matter so if a VA or FHA buyer there is no allowance for forbearance and all loans must meet the housing history requirements of the agency, as they exist in the respective manual.
Furloughed workers: lets face it- there are a lot of them out there right now and they have time to look and are actively shopping. Bottom line- no matter what type of loan you are applying for- You can not close while on unemployment. Keep in mind there is no guarantee their jobs will still be there after a furlough, some companies will not survive this. (Close to home My wife just found out her furlough has turned into actual unemployment since the owner of her company has decided to shut down permanently.)
Even if you are making more on UE now than you were there is no guarantee when you will return to work, and unemployment is not permanent. Workers will need to be back to work receiving normal pay prior to closing- evidenced by a pay stub. The bigger issue here will be for workers that have fluctuating incomes- as of today we will have to average in 2 months or more of zero income into the equation for averaging income. Rumor is Conventional loans will allow us to make adjustments for furloughs in the equation, but that is not official yet and for GNMAs- it is less likely they will allow that at all.
So to sum up- F words are BAD… and unless you have a cash buyer (where you have sourced the funds to qualify) you shouldn’t be showing anyone a home that is furloughed our took advantage of a forbearance.
As always- I am here to help keep your deals together with happy clients at the end of the transaction. I look forward to seeing everyone’s faces once this is all over.
Call me for all your residential lending needs!
Mortgage Loan Originator NMLS# 248937
or my blog: http://activerain.com/blogs/rrauf
Office: (732)908-4868 Cell (732)740-0175
Since 1987 I have been helping my clients fulfill their dream of home ownership! HomeBridge Financial Services, Formerly REMN, HomeBridge Financial Services is located at 9 Grand Ave, Building 2 Suite A Toms River, NJ 08753. NMLS #6521. New Jersey Licensed Lender and Mortgage Banker #L041053. Visit www.Homebridge.com for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721,