With the latest economic downfall and people losing their jobs at an alarming rate, mortgage payments are slowly becoming a heavy burden for homeowners. Temporary financial hardships are very common today and as a result, some homeowners need help to avoid the doom of foreclosure and potential home loss.

If you are nearing a foreclosure due to a temporary hardship, contact your lender immediately to discuss your options. Most lenders will offer forbearance in cases where a financial resolution is imminent at some time in the future. If you withhold this information from your lender, you will only hasten the foreclosure process. You have a chance to avoid foreclosure if you open the lines of communication with your lender.

What is forbearance?

Forbearance is a temporary solution lenders offer to homeowners who experience a temporary setback in their finances. With forbearance, you can reduce your monthly payments or suspend them for a specified period of time. Your lender will then require you to pay back the unpaid balance once the forbearance period concludes.

It’s important to understand the circumstances which necessitate the need for forbearance. Temporary setbacks are not to be confused with long term financial concerns such as bankruptcy, credit issues, etc. A temporary financial setback would include:

• Loss of income due to a temporary medical condition or unemployment
• Damage to your home due to a natural disaster
• The ejection from your home due to an unforeseen circumstance and you are waiting for your insurance company to send you claim money.

These and many other scenarios may allow you to ask your lender for a forbearance application. As long as there is a foreseeable end to the conflict, a lender will be more inclined to approve your request.

What is needed to qualify for forbearance?

In order to qualify for forbearance, you must show evidence of a temporary loss of income. You must also show that you did not miss any of your previous mortgage payments.

Note: Your lender will require you to submit information that demonstrates the reason for your delinquent payments so they can determine if you are qualified for forbearance. You must be expected to recover from that which propelled you into the delinquency or you will not be approved.

Paying Back after the Forbearance Period Runs Out

Once your financial status recovers and the time period specified runs out, you will be required to pay back the past due amount.

Once your forbearance expires, if you are unable to repay the full amount due, lenders may extend your contract. You may also have the option to devise a new agreement. Some lenders may not allow you to extend the forbearance period, but they may permit you to pay it down with your normal mortgage payments until your balance is due in full. These stipulations will vary by lender, but generally you are required to pay in full once the period expires. Failure to do so could mitigate the possibility of foreclosure.

How to Apply for Forbearance

You can contact your lender and discuss your situation with them and ask for a forbearance application. You will be required to submit financial records. Forbearance contracts necessitate the need for a qualified professional. Before you even make your decision, speak to a counselor to discuss your options. You can often discover a solution to prevent any future loss without the need for forbearance. If you do decide to pursue forbearance, you can also consult with a HUD counselor about the details of the contract, so you are protected and you understand exactly what is required of you now and when the forbearance period expires.