The COVID-19 shutdown has brought with it unprecedented difficulties—accompanied in many cases by unprecedented solutions. Local, state, and federal government, private industry, medical establishments, and concerned individuals have sought to offset the fear and frustrations brought about by the pandemic. Beginning in its earliest days, proactive measures were designed to minimize the pandemic’s long-term impact—both personal and economic.

As many parts of the country attempt to move toward something like normal, programs initiated in the first days of the pandemic are coming to an end or changing in scope. Among these, mortgage forbearance programs created for both government-backed and private mortgages will soon be running out of steam. Find out why this may be good news for frustrated buyers whose real estate goals have been hampered by tight markets throughout the past several months.

Where did pandemic-related mortgage forbearance come from?

When COVID-19 shutdowns first occurred in mid-March 2020, the federal government put through a number of measures to ameliorate the economic impact of potential job loss and a looming recession. Initially, the CARES Act was passed just days after the shutdown began, with subsequent updates, extensions, and enhancements added in the months following.

Part of the CARES Act provided homeowners with the opportunity to apply for mortgage forbearance if they had government-backed mortgages. This included HUD-FHA, VA, and USDA loans, as well as loans backed by Fannie Mae and Freddie Mac. In addition, many mortgage providers offered their own forbearance programs, even for those borrowers without government-backed loans.

When will forbearance end?

After multiple extensions, forbearance is currently set to expire on September 30, 2021. That means that homeowners who are eligible for forbearance, either through government or private programs, must apply by that date. Further extensions could be added, though at this point there is no indication that they will occur.

How is forbearance tied to increased inventory?

According to a recent report by Zillow, 25 percent of borrowers who exited forbearance during the past year did so without bringing their mortgage up to current and without a plan for doing so. If this is an indication of future trends, many of the 1.7 million homeowners currently in forbearance will soon be exiting without a solid way of resuming their mortgage payments.

Following forbearance, homeowners have a number of options:

• Resume paying their mortgage as currently structured while also getting caught up on missed payments
• Apply to refinance their mortgage to make repayment more manageable
• Put their home on the market and sell it to pay off the mortgage.

Zillow estimates that approximately 211,700 homes will go on the market as a result of the end of mortgage forbearance. This could create significant relief in markets that have been stretched thin by tight inventory caused by homeowners staying put during the pandemic.

How can buyers prepare for a more active market?

Buyers who were unable to purchase earlier in the pandemic may be beginning to see movement in their chosen markets. Recent months have seen increasing inventory, especially among smaller “starter” homes, and the end of mortgage forbearance may help contribute to this trend. Now, hopeful buyers should do the following to prepare for the changing market:

• Renew contact with lenders, real estate agents, and other professionals to begin exploring options and prices in your chosen neighborhoods.
• Be prepared to adjust your search parameters. The last few months have seen rising home prices and some changes in interest rates. You’ll want to run new numbers to see if your budget has changed or if you’ve been priced out of your favorite area.
• If you’ve changed jobs during the pandemic, you’ll need to talk to your lender and find out how this will affect your application. In some cases, as long as you are working in a similar field to your previous one, your job history won’t be significantly affected.
• Be aware of the way that your finances may have changed during the pandemic. If you’ve had to take on additional debt, or if you’ve paid off debt, your credit score may have changed significantly. This will, in turn, affect your interest rate.
• Talk to your real estate agent and find out if your real estate goals still make sense for your post-pandemic lifestyle. If your job is now permanently home-based, you may be able to trade that expensive in-town or commuter-friendly neighborhood for a more affordable one further from the city center.
• Similarly, if you were choosing your home based on the local schools, you may find that online school is working better for your children. If this is the case, you may want to explore school systems with more robust online classroom programs rather than focusing on proximity to physical classrooms.
• If you are working from home, your wish list may have changed significantly. If you and your spouse are both working from home permanently, you may need a larger space with more room for multiple home offices. You may forgo an open-concept floorplan for more private spaces. You may want to consider an accessory dwelling unit (ADU) or use a garage apartment as a separate office space for greater flexibility and efficiency.

Consistent and clear communication with your trusted real estate professional makes all the difference, whether you are rebooting your home search or starting from scratch. Putting together a plan that makes sense for the way you and your family live now, and for what you’re expecting in the months and years to come, will ensure that you get the most out of your real estate purchase experience.