How Forbearance Works With FHA and VA Loans

How forbearance works with FHA and VA loans, and how to end it.

Do you have more questions about forbearance? I recently sat down with Sarah Hubbard, a loan advisor at Vertex Financial Group, and we covered the basics of the topic in this video. Today Sarah and I will cover forbearance with Federal Housing Administration (FHA) and Veteran Affairs (VA) loans, specifically. We know a lot of our clients use these, and the number of people who had to go into forbearance rose recently, so we wanted to share this information with you.

With forbearance on an FHA loan, most companies use loan modification. This is where they add the deferred amount (the amount you had left and are using forbearance to postpone) to your current loan balance, then recalculate your payment based on the current interest rate. Customers are required to make a minimum of three payments to end their forbearance.

"The VA has stricter guidelines for waiting periods if you want to refinance again."

In contrast, VA loan companies will not modify your loan and just allow your balance to sit instead. They do not recalculate payments. You have to completely exit forbearance and make six consecutive payments before you can do anything else with a loan.

The VA has stricter guidelines for waiting periods if you want to refinance again. For both the FHA and VA loans, you have to make your payments in separate installments—you cannot pay in bulk.

Ideally, if someone in this situation wanted to sell their home, they would go through this process first and finish all their payments. If they sold their home and the loan is paid in full, then their forbearance has ended.

I know this is a lot of information, so don’t let it overwhelm you! If you have any questions about forbearance or your specific situation, reach out to me or Sarah through phone call or email, and we will happily answer. We look forward to hearing from you!

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