The CARES Act is an attempt by the United States Congress to provide financial relief to all Americans. By now you have probably heard or even have your stimulus payment of $1,200 per person. It varies if you are married, filing status, dependents and income factors. Did you know that the CARES Act also impacts your mortgage?
If you saw a drop or loss in income as a result of Covid-19, then there is help available.
Here is what you need to know about how the law will impact your mortgage right now and for years to come.
What Mortgages Qualify for Relief Under the CARES Act?
Before diving into the relief provided by the CARES Act, it is important to note who qualifies for aid.
The CARES Act only applies to federally backed mortgages. In other words, you qualify if you have an FHA, USDA, or VA loan or another type of mortgage backed by the federal government.
Most mortgages in the U.S. are backed by the government, but there are some exceptions.
If you have a private loan, then the CARES Act does not apply to you. However, you are not out of luck. Your lender may have their own Covid-19 aid relief or aid program. Contact your lender or servicer to learn more.
If your loan provider is no help, then you might still qualify for the New Jersey 90-day grace period on mortgage payments. However, the agreement may still depend on your relationship with your lender.
What Mortgage Relief Does the CARES Act Offer?
The CARES Act gives you several protections.
For many people, the most relevant protection right now is the right to ask for forbearance.
Borrowers experiencing financial hardship can request a mortgage forbearance for up to 180 days (six months). A mortgage forbearance allows you to pause or reduce your payments to give you time to refine financial stability.
You can also request an extension for an extra 180 days. You will not pay any fees, penalties, or added interest (outside of your normal interest). You also do not need to submit any documentation other than proof that you are facing a hardship related to the pandemic.
When your income returns to normal, your payments resume. However, they are not forgiven. You will need to pay them back all at once, over a period of time, or as a lump sum when you reach the end of your loan.
Is Foreclosure Possible?
The CARES Act also contained a provision that prevented foreclosures for 60 days beginning March 18, 2020. However, this period has now expired. You can still request a forbearance, but there is no federal protection from foreclosure for right now.
Your state may prevent foreclosures. Check your state government’s website for more information.
However, the U.S. Government Accountability Office (GAO) says it is incredibly important to keep an eye out for foreclosure rescue schemes.
These first emerged during the housing crisis (2007-2011), but they are still a concern for vulnerable homeowners. These scams are run by people who promise that they can force a loan modification via a lawsuit. However, they require fees for participation and can leave you in worse financial shape than you were before the scheme.
You can learn more about protecting yourself from these schemes on the GAO’s Watch Blog.
Can the CARES Act Help You Deal with Credit Pressures?
Forbearance remains the primary source of relief for American homeowners. However, there are other provisions of the act that could help you out in a pinch.
One provision creates breathing room for consumers who need a new payment plan with their lender. This option can apply to credit cards or to other loans, like a home equity loan.
It amends the Fair Credit Reporting Act to help you get concessions from your lender. Your lender can then give you a chance to restructure your payments to make them more manageable.
You can use this provision for either 120 days after March 27 or 120 days after the federal government declares the Covid-19 emergency to be over.
Does the CARES Act Help You Refinance?
The short answer is no. There is no provision in the law guaranteed to help you refinance and save money.
Although interest rates are lower right now, it is and will likely continue to be harder to refinance as long as the national emergency and the pandemic continue.
To refinance right now, you will unlikely be ineligible for other CARES relief because your pre-Covid-19 income must be intact. You will need to validate your employment as close to closing the loan as possible. So, if your income has been reduced or there is a wave of layoffs coming, then refinancing may not be impossible, even if you are in good financial shape otherwise.
Is It Still Possible to Buy a House?
Yes, you can still buy a house, even as a first time home buyer in New Jersey. FHA-backed mortgage products are still available. However, there have been temporary changes in requirements.
The big change is in proving your income. As with a refinance, you now need to provide proof of employment as close to the issuing of the mortgage note as possible. That means if you lose your income or job in the process of applying, you are likely to be denied even if you have substantial savings.
Are you still thinking about buying? Check out our guide to the FHA loan limits in New Jersey.
Worried About Your Payments? Learn Your Options
The CARES Act provides special mortgage relief to help Americans with federally backed loans to protect their homes during the pandemic. However, time is running out to ask for help. Many provisions expire 60, 90, or 120 days after the law passed in late March.
Do you have an FHA loan? Are you wondering about your options? Get in touch today to learn what mortgage relief may be available to you.
7th Level Mortgage is a leading one-stop mortgage company providing deeply informed, custom-tailored assistance with every phase of each mortgage transaction. If you are searching for a home loan in New Jersey, Pennsylvania, Delaware, Maryland, New York, or Florida, please contact us today so that we can determine the best Mortgage Lender to place your loan with and get you the best possible rate and program.