You can pause mortgage payments while selling your house if your loan servicer approves a forbearance agreement. Forbearance temporarily reduces or suspends your monthly payments while the home is on the market, and the deferred balance, together with the interest that keeps accruing, is paid off from your sale proceeds at closing. It is a formal arrangement, not an automatic right, and it defers what you owe rather than erasing it.
What Forbearance Actually Does While You Sell
Under a forbearance agreement, your servicer agrees to lower or stop your payments for a set period, waive late fees during that window, and hold off on foreclosure. In exchange, you commit to resolving the missed payments by a specific date. When the plan is to sell, that resolution happens at the closing table: the deferred amount is rolled into the total payoff.
Interest keeps accruing on the paused amounts the whole time. That unpaid interest adds to what you owe, so the payoff at closing will be higher than if you had kept paying on schedule.1Consumer Financial Protection Bureau. What Is Mortgage Forbearance? Build that extra cost into your estimate of net proceeds before you list.
Who Qualifies
Servicers evaluate forbearance requests based on documented financial hardship. Job loss, illness, divorce, and a significant drop in income are common qualifying reasons. You also need to show the hardship is temporary and that selling the home is a realistic way out of the debt. An active listing with a licensed real estate broker generally serves as evidence of that good-faith effort.
Loan type shapes the process. For Fannie Mae-backed loans, the servicer can evaluate you for a forbearance plan without a full documentation package; the servicer needs to speak with you directly, confirm the hardship, and can approve the plan on that basis.2Fannie Mae. Forbearance Plan FHA-insured loans follow similar streamlined procedures. Loans held by private lenders without government backing may have stricter documentation requirements and less predictable terms.
How Long a Forbearance Can Last
For Fannie Mae loans, the servicer can offer an initial forbearance of up to six months and extend it for up to six more, capping the total at 12 months. Anything longer needs Fannie Mae’s prior written approval.2Fannie Mae. Forbearance Plan FHA and other government-backed loans have their own timelines but generally fall in the same six-to-twelve-month range.
How to Request Forbearance
Start by contacting your servicer’s loss mitigation department. Most servicers offer a phone line and an online portal. The first conversation should cover your hardship and your intent to sell.
What you’ll need to submit depends on who owns your loan. Government-backed loans often require less than borrowers expect.2Fannie Mae. Forbearance Plan For other loans, expect requests for recent pay stubs, bank statements, and your most recent tax return; documentation of the hardship such as a termination letter, medical bills, or a divorce decree; a signed listing agreement showing the home is on the market; and a short hardship letter explaining why you can’t pay and what relief you’re asking for. A comparative market analysis or broker price opinion supporting your asking price can help, because it reassures the servicer that a sale will cover the payoff.
Once you apply, federal rules put the servicer on a clock. It must acknowledge receipt of your application within five business days and tell you whether the application is complete. Once it’s complete, the servicer has 30 days to evaluate it and send you a written decision covering the length of the forbearance, the specific terms, and what happens when the period ends.3eCFR. 12 CFR 1024.41 – Loss Mitigation Procedures
Foreclosure Protection While Your Application Is Under Review
Federal law bars servicers from starting foreclosure while they’re reviewing a loss mitigation application, a practice known as dual tracking. Under Regulation X, if you submit a complete application before the servicer has filed any foreclosure paperwork, the servicer cannot initiate foreclosure unless it has formally denied you for all available options and any appeal window has passed, you reject every option offered, or you fail to follow through on an agreed plan.4Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures
Even if a foreclosure is already in motion, submitting a complete application more than 37 days before a scheduled foreclosure sale stops the servicer from moving forward while your application is under review.4Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures That gives you room to get a forbearance in place and finish the sale.
How the Deferred Amount Is Paid at Closing
Forbearance defers debt; it doesn’t reduce it. When you sell, the deferred balance comes due out of the proceeds. The title company requests a payoff demand statement from your servicer that includes your unpaid principal balance, the interest that accrued during forbearance, and any escrow shortages if the servicer covered property taxes or insurance while payments were paused. The settlement agent subtracts that total from the sale price, then deducts commissions and other closing costs. What’s left is your equity.
If the home sells for $400,000 and the full payoff, including deferred amounts and accrued interest, comes to $350,000, you receive the remaining equity after commissions and other closing costs. The lender is paid in full before you take any cash off the table. If your relief came through a Fannie Mae payment deferral, the entire deferred balance is due when the home is sold.5Fannie Mae. Forbearance
If the House Doesn’t Sell Before Forbearance Ends
Your servicer is required to reach out at least 30 days before your forbearance ends to talk through next steps.2Fannie Mae. Forbearance Plan Don’t wait for that call. If the home hasn’t sold, contact the servicer early and ask what’s available. Depending on your loan and situation, options can include:
- A forbearance extension of up to six additional months if you still qualify. For Fannie Mae loans the total generally can’t exceed 12 months without special approval.2Fannie Mae. Forbearance Plan
- A repayment plan that adds an amount to your regular monthly payment so you catch up on the missed balance over a period of up to 12 months.6Fannie Mae. Loss Mitigation
- A payment deferral that moves the missed payments to the end of the loan as a non-interest-bearing balance, due when you sell, refinance, or pay off the loan.6Fannie Mae. Loss Mitigation
- A loan modification that changes the original terms, adjusting the monthly payment, interest rate, or loan term to make future payments more manageable.6Fannie Mae. Loss Mitigation
If none of those work and payments still aren’t possible, the servicer can move toward foreclosure. Reaching out before the forbearance period expires is the surest way to keep that from happening.
If You’d Have to Sell for Less Than You Owe
If your home’s market value has dropped below the payoff amount, the situation shifts from a standard forbearance into short sale territory. Federal loss mitigation rules treat a short sale as a separate option, and your servicer may require an appraisal or title search before approving terms.4Consumer Financial Protection Bureau. 12 CFR 1024.41 – Loss Mitigation Procedures During any marketing or listing period agreed to as part of a short sale, you’re considered to be performing under the loss mitigation agreement, and the servicer can’t move ahead with foreclosure while you’re actively marketing the property.
Credit Reporting and Buying Again
Servicers are barred by federal law from reporting information they know or have reasonable cause to believe is inaccurate.7Office of the Law Revision Counsel. 15 USC 1681s-2 – Responsibilities of Furnishers of Information to Consumer Reporting Agencies A forbearance you’re following as agreed should not appear as a string of missed payments. Your account may still carry a notation that it’s in a forbearance or payment plan, and that notation can affect how future lenders read your file.
Planning to buy again after selling? For Fannie Mae and Freddie Mac loans, borrowers who exit forbearance through a repayment plan, payment deferral, or loan modification are eligible for a new mortgage after making at least three consecutive on-time payments.8Fannie Mae. Options After a Forbearance Plan or Resolved COVID-19 Hardship The Federal Housing Finance Agency has confirmed the same three-month, three-payment standard.9U.S. Federal Housing Finance Agency. FHFA Announces Refinance and Home Purchase Eligibility for Borrowers in Forbearance
When forbearance is resolved through a sale that pays the loan in full at closing, there’s no post-forbearance payment history to show, so some lenders apply a longer waiting period before approving a new loan. The exact timeline depends on the new loan program and the lender’s guidelines. Ask any prospective lender about their specific requirements before you assume you’re ready to shop.
Taxes if Any Debt Is Forgiven
If the sale covers the full payoff, including all deferred amounts, there are no special tax consequences; you paid what you owed. The picture changes if the servicer forgives part of the debt, which can happen in a short sale or when proceeds fall short of the balance. The IRS generally treats canceled debt as taxable income, and forgiven amounts may be reported on Form 1099-C and included on your return for the year the cancellation occurred.10Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not?
A federal exclusion previously let homeowners exclude canceled debt on a primary residence from income, but that provision covered debt forgiven through December 31, 2025. Unless Congress extends it, canceled mortgage debt on a principal residence in 2026 is taxable unless another exclusion, such as insolvency at the time of cancellation, applies.10Internal Revenue Service. Topic No. 431, Canceled Debt – Is It Taxable or Not? If a short sale is on the table, talk with a tax professional before closing to understand your potential liability and whether any remaining exclusion fits your situation.