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Deferred mortgage payments aftermath
Many homeowners deferred their mortgage payments at the onset of the COVID-19 pandemic and we are now seeing the aftermath of doing that.
Some deferred their mortgage payments even when they were still working as the option was readily available without many questions or an explanation of possible consequences.
It’s unfortunate that clear explanations weren’t provided, but it was a hectic and scary time for everyone and the lenders had to make an about face from their regular operating procedures.
Here’s what we know today. The deferred mortgage payments are now reporting on credit reports and although a deferred payment may not technically affect your credit score, it’s definitely being scrutinized very closely by lenders should you want to make any changes to your mortgage or secure new mortgage financing.
If you have deferred mortgage payments you will now see one of these notations or both on your credit report.
- Deferred Payment
- Affected by Natural or Declared Disaster
This will be a red flag to any lender and they are going to take a closer look when reviewing any new mortgage financing request whether it’s a request to refinance your current mortgage or if you are looking to secure a mortgage to buy a new property.
Deferring a mortgage payment is a sign of financial hardship. The lender may:
- Review your income/employment more closely
- Ask for more documentation
- Decline you if you have borderline qualifications, particularly if you’re employed in a higher-risk industry.
If you aren’t able to make your mortgage payments, they will be hesitant to lend to you. When speaking with your mortgage broker or a new lender, always disclose upfront that you have deferred your mortgage payments.
Before applying for a mortgage ensure that you have returned to work and things are back to normal. The lender will request full income documentation to confirm your employment status and they will also make a call to your employer to confirm that you are currently working and will remain so.
They will do this at the time of an approval and again prior to funding the mortgage.
If you are self-employed bank statements will be required to show that you are again generating income. They may also require copies of contracts or receipts to prove you are now back working.
All lenders are going to want to see that you have resumed your regular mortgage payments so you should ensure that you’ve done that before looking to refinance or you start looking for a new home.
These are definitely unprecedented times so if you are considering any type of mortgage financing please reach out and we can review your current circumstances and recommend any steps you may need to take to get you in the best position to move forward with your plans.
This article is written by or on behalf of an outsourced columnist and does not necessarily reflect the views of Castanet.
