When you apply for a mortgage, it can sometimes be hard to understand how much of a monthly payment you can afford. Oftentimes you have to factor in additional fees and property taxes that add to the base cost of your monthly payment.
You can’t always rely on a mortgage broker or lender to ensure that you’re getting a responsbile loan that you can afford.
That’s why the Consumer Finance Protection Bureau (CFPB) introduced the Ability-to-Repay rule.
Under the new rule, lenders have to ensure that you can pay back the loan plus interest over the long term.
According to CFPB, in order to do that, lenders will need to verify the following before they can issue you a loan:
- Current income or assets;
- Current employment status;
- Credit history;
- The monthly payment for the mortgage;
- The monthly payments on any other loans associated with the property;
- The monthly payment for other mortgage related obligations (such as property taxes);
- Other debt obligations; and
- The monthly debt-to-income ratio or residual income the borrower would be taking on with the mortgage. (Debt-to-income ratio is a consumer’s total monthly debt divided by their total monthly gross income).
These rules will help protect you from lenders who might try to sell you an irresponsible mortgage that you can’t afford.
Learn more about the Ability-to-Repay rule.
If you need help paying your mortgage, you may be eligible for assistance through a variety of programs.
Through the Making Home Affordable program, you can
- Refinance and take advantage of lower mortgage interest rates.
- Reduce your monthly mortgage payments.
- Get mortgage relief if you’re unemployed.
- Get help when you owe more than your home is worth.
- Avoid foreclosure when homeownership is no longer affordable or desirable.
You can also talk to a housing counselor to get advice on buying a home, avoiding foreclosure, or learning about reverse mortgages.
If you’re considering refinancing your mortgage, learn the costs and determine if the time is right for you.
Get help with your mortgage and foreclosure questions.
To learn about other free resources to help you no matter what your financial situation, sign up for our e-mail list or visit our page.
In recent years, many people have turned to individual agencies, housing counselors and various lenders to avoid foreclosing on their homes. Unfortunately, many families found themselves paying scammers who took their money and failed to protect them.
It doesn’t have to be this way. Any person at risk of losing his or her home due to foreclosure can receive free counseling from the Department of Housing and Urban Development’s (HUD) nationwide network of approved counseling agencies.
HUD’s nationwide network of approved counseling agencies can help families who are trying to avoid foreclosure. Although each agency offers specific services, in general you can receive the following types of help:
- General counseling in matters related to housing
- An evaluation of your specific housing situation
- Counseling on ways to avoid foreclosing on your home
- Help with refinancing through HUD’s various programs or with lender negotiations
HUD-approved agencies cannot charge for their foreclosure counseling services. However, they can charge a reasonable fee for other services, such as general housing education, pre and post-sale counseling, and other services.
Preparing for Your First Meeting
You don’t need to wait to be in foreclosure to seek counseling. If you think you may run into problems paying your mortgage, it is better to seek foreclosure counseling sooner, rather than later. Having the following financial information ready will make your first meeting with a counseling agency more productive:
- Household monthly income and expenses
- Current monthly mortgage payment amount
- Latest mortgage account statement
- Any relevant communication with your lender regarding late mortgage payments
It is also a good idea to have a sense of what you want to accomplish with the help of the approved counseling agency – keeping your home, selling it, refinancing, etc.
Working with a Non-Approved Agency
If you choose to work with a non-approved agency, consider taking certain steps to avoid falling victim to scams:
- Avoid paying for foreclosure counseling services. HUD-approved agencies provide these services at no cost.
- Resist any tactics that pressure you into signing documents without enough time to go over them carefully.
- Do not sign over the deed of your house to any other person or organization.
- Make your mortgage payments only to your lender or an institution approved by your lender.