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237 Mortgages Questions and Answers

A friend asked me to be a co-signer on a mortgage loan. What does that mean?

If you cosign a loan, you are responsible for the payments if the primary borrower does not pay. You are not just serving as a reference for the primary borrower; you are putting your own credit history and finances on the line. If neither you nor the primary borrower pay, it will hurt your credit score and history. You may also be sued for the debt.

A mortgage relief company offered to help with my mortgage problems if I paid them a fee in advance. Should I pay the fee?

No, and you should not work with this company. Mortgage relief companies may not collect any fees until they have provided you with a written offer from your lender or servicer that you decide is acceptable and a written document from the lender or servicer describing the key changes to your mortgage that would result if you accept the offer. The companies also must remind you of your right to reject the offer without any charge.

If a mortgage relief company has tried to charge you an advance fee to obtain help with your mortgage, report that company by filing a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

You can also get real help by calling the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

After I have paid off my mortgage, how do I check if my lien was released?

State property records will show whether your lien is released. You can find information on property records by contacting your local Secretary of State or county recorder of deeds. After you pay off your mortgage, your lender should also return the original note to you. You can also contact the company that paid off your loan to find out if the lien was released. Note that there may be a delay between the time you pay off your mortgage and the release of your lien.

Are there any limitations on the upfront charges a bank can charge for a reverse mortgage?

Some fees are limited and some are not. Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. Upfront charges for a HECM loan consist of the upfront Mortgage Insurance Premium (MIP), the origination fee, and a counseling fee. There are limits on all of these fees.

Standard real estate closing costs (such as an appraisal, title insurance, etc.) must also be paid upfront, but three are no limits on these fees.

The Mortgage Insurance Premium (MIP) is a one-time, nonrefundable charge. Borrowers have a choice between two types of loans:  A HECM Standard, which allows you to get the highest amount of money from your home, and a HECM Saver, which offers somewhat less money.  With a HECM Standard, the upfront MIP is 2% of the appraised value of your home (up to $625,500). With a HECM Saver, the upfront MIP is 0.01% of the appraised value of your home (up to $625,500).

Lenders may charge an origination fee of up to $6,000.  For homes worth less than $400,000, the maximum origination fee is calculated on a sliding scale between $2,500 and $6,000. For homes worth more than $400,000, the maximum origination fee is $6,000.  

A reverse mortgage counseling fee usually costs around $125.

Closing costs are not capped. These costs vary from lender to lender. It is important to shop for the best deal.

TIP: Some lenders may agree to pay some of these costs for you. In today’s market, it is common for lenders to waive or discount the origination fee.  Some lenders may also pay some of your closing costs, though typically this discount is only available if you agree to a higher interest rate on the loan.  Talk to your reverse mortgage counselor about which option is right for you.  You can find counselor approved by the U.S. Department of Housing and Urban Development (HUD).  by visiting HUD’s counselor search page  or calling HUD’s housing counselor referral line (1-800-569-4287).

Are there different types of reverse mortgages?

Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. The HECM program offers several product options.

  1. Loan type. Borrowers have a choice between two types of loans: A HECM Standard, which allows you to get the highest amount of money from your home, but has higher upfront fees, and a HECM Saver, which offers somewhat less money but has lower upfront fees.
  2. Payment of loan proceeds. Borrowers can receive their money as a line of credit, monthly cash advance, a combination of these, or a lump-sum.
  3. Interest rate. Borrowers can choose an adjustable interest rate or a fixed rate. However, as of April 1, 2013, fixed rates are only available on the HECM Saver with a lump-sum payment option.     

The HECM program offers two special-purpose loan options for special circumstances. The HECM for Purchase option allows older homeowners to use reverse mortgage proceeds to buy a new home. The HECM Refinance program allows a HECM loan to be refinanced into a new HECM loan in situations where the interest rate has dropped or where the home has gone up in value significantly.

TIP: The best way to see key differences in reverse mortgage product options is to do a side-by-side comparison of costs and benefits. Remember, just because you can borrow a large sum does not mean that’s the best choice for you. Ask your reverse mortgage counselor to help you compare the different options. You can find a HUD-approved counselor by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).

TIP: You will get the most in loan proceeds and pay the least amount of interest if you take out the funds only as you need them. This may mean waiting to take a reverse mortgage until you are older, or taking a line of credit or monthly payout instead of a lump sum.

NON-HECM REVERSE MORTGAGES

Single-purpose reverse mortgages are also offered by some government and non-profit organizations. They may only be available in some areas for homeowners with low to moderate income and used only for the purpose specified by the lender (for example home repairs or property taxes).

Some lenders also offer proprietary reverse mortgages, which are not federally insured and are typically designed for borrowers with higher home values.

Are there other types of loans that can serve a similar purpose as a HELOC?

Depending on your financial situation and needs, you may be able to get other loan products that cost less or involve less risk than a HELOC and make more sense for you. A U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can help you identify and evaluate the available alternatives. To find a HUD-approved housing counselor visit HUD’s websiteor call (800) 569-4287.

Are there other types of loans that can serve a similar purpose as a reverse mortgage loan?

Depending on your financial situation and needs, there may be other types of loans that make more sense for you. These include second mortgage loans, which may have lower fees – but you will need to be able to make the loan payments. Additionally, a number of states, local government agencies, and nonprofit organizations have single-purpose reverse mortgage loan programs that allow borrowers to pay for home repairs, improvements, or property taxes.

Some localities have other types of programs for seniors facing property taxes that they are unable to pay. If you need this type of service, visit www.eldercare.gov or call your local county tax assessor and ask about senior “circuit breaker” programs. A housing counselor can help you identify and evaluate the available alternatives. To find a counselor, visit the Department of Housing and Urban Development's (HUD) website or call 1-800-569-4287.

Are there situations where I would not have a right of rescission?

The right of rescission does not apply in every case where your home is used as collateral for the loan. For example, you do not have the right of rescission when:

  • Your loan is used to purchase or build your principal home
  • You consolidate or refinance with the same creditor a loan that is already secured by your home, and no additional funds are borrowed
  • A state agency is the creditor for the loan

Can a lender make me provide documents like my W-2 or paystub before they give me a Good Faith Estimate?

A lender or mortgage broker cannot require you to provide any documents to verify the information you provide on the loan application as a condition for providing you with a Good Faith Estimate (GFE). However, a lender or mortgage broker may ask you to provide additional information at any time, and may require you to provide verification of information on the application as part of final approval of the loan.

Can a lender or broker ask me about my race, color, religion, national origin, or sex?

With respect to most mortgage transactions, a creditor such as a lender or broker may ask about your race, ethnicity, and sex to comply with anti-discrimination laws.

Can a lender or broker ask me about the alimony, child support, or separate maintenance payments that I receive?

In general, only if you want the creditor to consider such payments as part of your application for credit. A lender or broker may ask whether income stated in your application comes from alimony, child support, or separate maintenance payments. However, the lender or broker must tell you that you do not have to reveal such income if you do not want it considered.

Can a lender or broker consider my age when deciding whether to give me a mortgage or home equity loan?

Generally, a creditor such as a lender or broker cannot use your age to make credit decisions. However, there are exceptions to this rule. For example, age can be considered in a valid credit scoring system. Even then, the credit scoring system may not disfavor applicants 62 years old or older. The scoring system may favor applicants 62 years or older. In addition, a lender or broker may relate your age to other information about you that the lender or broker considers in evaluating creditworthiness. For example, a lender may consider your job and length of time to retirement to determine whether your income (including your retirement income) will be adequate for the life of the loan.

Can a lender or broker consider my sex or marital status when deciding whether to give me a mortgage or home equity loan?

A creditor such as a lender or broker cannot discriminate on the basis of sex or marital status.

With respect to most mortgage transactions, a lender or broker may ask for your sex, but only to support compliance with anti-discrimination laws.

If you are applying for joint credit or credit secured by collateral (like a mortgage or home equity loan), the lender or broker may only ask if you are married, unmarried, or separated. The lender or broker may explain that the unmarried category includes single, divorced, and widowed persons. 

A lender or broker may consider your marital status as it affects the creditor’s ability to reach the property in the event of nonpayment. For example, for mortgage and home equity loans, a creditor could consider whether your spouse has an interest in the property that is being offered as collateral for the loan.

Can a lender or broker consider the fact that I am not a citizen of the United States?

A creditor such as a lender or broker cannot discriminate on the basis of national origin. However, a lender or broker may ask about your permanent residency and immigration status. A lender or broker may consider this information or any additional information that may affect its rights and remedies regarding repayment.

A lender or broker may also take into account any law, regulation, or executive order that limits dealings with citizens of certain countries.

Can anyone apply for a reverse mortgage loan?

No – there are certain requirements you must meet in order to be eligible for a reverse mortgage:

  • You must be at least 62 years old.
  • The home must be your primary residence.
  • You must have paid off some or all of your traditional mortgage.

If you want to get a reverse mortgage and you still owe money on a traditional mortgage, you must use part of the money from the reverse mortgage to pay off the traditional mortgage. There are limits on how much money you can get from a reverse mortgage, so if you have a high traditional mortgage balance, you might not qualify for a reverse mortgage.

Most reverse mortgages today are insured by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgage (HECM) program. This program requires that you meet with a reverse mortgage counselor approved by the U.S. Department of Housing and Urban Development (HUD) to discuss how a reverse mortgage works and how much it will cost you.  FHA also requires that your home be in good shape. If your home is poorly maintained, you may need to repair it before you can get a HECM reverse mortgage.

If you have a spouse or other relatives living with you, think very carefully before applying for a reverse mortgage. Couples can apply together as co-borrowers, and for most couples this is the best choice if they decided to pursue a reverse mortgage. When couples are listed as co-borrowers on their reverse mortgage, one spouse can continue to live in the home even if the other spouse dies or has to move to a nursing home. Unmarried couples, siblings, etc, can also apply together as co-borrowers and receive the same rights, as long as both people are over age 62. People who live in the house and are not co-borrowers will probably have to move when the borrower dies or moves out, since the home will usually be sold at that time to pay off the reverse mortgage.

Can I be charged a penalty for paying off my mortgage early?

Whether you can be charged a penalty for paying off your mortgage early depends on what type of mortgage you have and the specific terms of your mortgage loan.

Some loans have pre-payment penalties during the first years of the loan. These fees may impose substantial costs on homeowners with adjustable rate mortgage loans who want to refinance before their rates increase, and some fixed mortgages have prepayment penalties as well.

Many states have laws that limit the amount or duration of these penalties. Whether your loan carries a prepayment penalty must have been disclosed in your loan documents. Sometimes it is only disclosed in something called the “Addendum to the Note” – look at the Note and anything with “Addendum” in the title.

Can I ever waive my right to rescind? What if I have an emergency and cannot wait three days for my refinance loan proceeds?

You can waive your right of rescission (that is, your right to cancel your transaction within three business days for your refinance or second mortgage), if you have a "bona fide personal financial emergency.” However, if you waive your right to rescind, you lose your right to cancel the credit transaction.

You must give the creditor your own written statement (pre-printed forms are not allowed) describing the emergency and clearly stating that you are waiving your right to rescind. The statement must be dated and signed by you and anyone else who shares in the ownership of the home

TIP: Consider your decisions carefully: If you waive your right to rescind, you lose your right to cancel the transaction.

Can I send a QWR no matter what kind of mortgage I have?

You can send a QWR to ask for information regarding the servicing of your loan or to dispute errors about your loan account for first mortgages, but not for second mortgages or lines of credit. You should try to resolve any dispute, no matter what kind of mortgage you have, with your servicer first. For additional assistance with any kind of mortgage, you canfile a complaint with the CFPB online or by calling 1-855-411-CFPB (2372), orcall 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor.

Can I use a reverse mortgage loan to buy a home?

Yes. The Department of Housing and Urban Development (HUD) has a “HECM for Purchase” program that allows seniors, age 62 or older, to purchase a home using a reverse mortgage. For more information on this program, visit HUD's website, or ask your housing counselor. You can find a housing counselor using HUD’s counselor search page.

Can my partner, family, or dependents live in my home if I have a reverse mortgage?

A reverse mortgage does not create restrictions on who may live in your home with you. However, if a spouse or partner is not a co-borrower on the reverse mortgage, that person may be forced to move if you die or move out. This is true for any other non-borrowers living in the home. The loan must be repaid when the last borrower has died or moved out, and most people will have to sell the home in order to repay the loan.

TIP: Before you apply for any reverse mortgage loan, you (and your spouse or partner) should seek housing counseling to help you determine whether a reverse mortgage is the best option for you. You can find a HUD-approved counselor by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).

Can my servicer report negative information about me to a credit-reporting agency after I have sent a QWR or while they are investigating my dispute?

During the 60-day period beginning when your servicer receives your QWR about a dispute relating to your payments, a servicer may not provide information about any payment or payments that is the subject of the QWR to any consumer reporting agency or credit bureau. If your servicer has reported such information you can file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

Can the final loan costs be different from the Good Faith Estimate?

If you obtained your loan after January 1, 2010, the following items listed on the Good Faith Estimate (GFE) CANNOT increase:

  • The “Origination Charge” listed in Block 1
  • If your interest rate is locked, the “Credit or charge (points) for the specific interest rate chosen” in Block 2
  • If your interest rate is locked, your “Adjusted Origination Charges” listed in Box A
  • The Transfer Taxes listed in Block 8

The following items listed on the most recent Good Faith Estimate you received cannot increase in total by more than 10 percent at closing:

  • Services listed in Block 3, which are services for which your lender chooses the provider
  • Title services and lender’s title insurance charges listed in Block 4, if you use a company identified by your lender
  • Owner’s title insurance listed in Block 5, if you use a company identified by your lender
  • Charges listed in Block 6, if you select a company listed for those services in Block 6
  • Government recording charges listed in Block 7

The following items can change:

  • Charges for any services that you obtain from a company not listed by your lender
  • Title services, lender’s title insurance, and owner’s title insurance if you do not select a company identified by your mortgage originator
  • Your initial escrow deposit listed in Block 9
  • Your daily interest charges listed in Block 10
  • Your homeowner’s insurance listed in Block 11

Do all reverse mortgage lenders offer the same products?

Most reverse mortgages today are insured by the Federal Housing Administration (FHA) through its Home Equity Conversion Mortgage (HECM) program. There are several HECM products available, but not all lenders always offer all of the products.

In addition to HECM mortgages, some lenders offer proprietary (non-FHA insured) reverse mortgages, which are typically designed for borrowers with higher home values.

If you are interested in a reverse mortgage, you should compare product options among several lenders to make sure you will get the loan features you want. You should also compare interest rates and fees among several lenders to see who has the best deal.

Do I ever have to buy property or flood insurance from my lender?

No. You may shop for property or flood insurance. But if you do not get homeowner’s insurance, or let your policy lapse, your lender may insure your property and charge you for it. This is called “force-placed” or “collateral protection” insurance. It is usually much more expensive than a regular policy. A lender may also buy “force-placed” flood insurance for homeowners in flood zones who do not have adequate flood insurance to meet the legal minimum required to protect the property.

If you can obtain your own insurance, it will generally be less expensive than the insurance bought by your lender for you. In some cases of force-placed insurance, the policy that the lender buys protects their interest but not your interest in the property. If you believe that any force-placed insurance was purchased in error, you should contact your lender immediately and give proof of your current insurance policy.

TIP: If you disagree with your lender’s determination that you need flood insurance, you can review the FEMA flood maps. If you think there has been an error, you can ask FEMA to issue a Letter of Map Amendment (LOMA), or a Letter of Map Revision Based on Fill (LOMR-F).

TIP: If your loan doesn’t include an escrow account, you will have to plan for potentially large property-related expenses, such as property taxes and homeowner’s insurance premiums. Be sure you budget for your monthly mortgage payments plus these extra costs and stay current on your taxes and insurance payments. If you fail to pay your property taxes, your state or local government may impose fines and penalties or place a tax lien on your home.

In addition, if you fail to pay any of your property-related costs, your lender may add the amounts to your loan balance, add an escrow account to your loan, or require you to pay for insurance on your home that your lenders buys on your behalf, which likely would be more expensive and provide fewer benefits than what you could obtain on your own.

Do I have the right to receive a copy of my home appraisal?

Lenders are required to provide you with a copy of your home appraisal if you make a request in writing after submitting your application. You can be charged for the appraisal itself, but must be provided a copy at no cost.

Do I have to borrow as much as I am prequalified, preapproved, or approved for?

No. You may choose to borrow less.

Do I have to pay for someone to help me modify my mortgage?

You do not need to pay someone large sums of money to help you modify your mortgage. People who charge a lot of money in advance of any result may be violating the law. Depending on your financial situation, U.S. Department of Housing and Urban Development (HUD)-approved housing counselors offer their services at little or no cost to you.

Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through HUD's Housing Counseling Program. Call the CFPB Consumer Hotline at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today or to submit a complaint with us. You can also submit a complaint online.

If you have paid someone to modify your mortgage before any results, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

Do I have to use an estate planning service or pay to find a reverse mortgage?

You do not have to pay an estate planning service or anyone else to find you a reverse mortgage. The Department of Housing and Urban Development (HUD) provides both a list of HUD-approved lenders on its website at no cost to you and referrals to HUD-approved housing counselors who can help you determine whether a reverse mortgage is the best option for you.

You can find a HUD-approved counselor by visiting HUD’s counselor search page or calling HUD’s housing counselor referral line (1-800-569-4287).

Do I need an attorney at the closing?

Depending on what state you live in, you may not be required to have an attorney at the closing. However, it may be a good idea to have an attorney represent you at closing or at least be available to answer questions you may have during the closing.

Even if you do not choose to have your own attorney at the closing, you should know that the attorney handling the closing for the lender is not acting as your personal attorney. The person may not be able to answer your questions and may have to act in the lender’s interests, not yours. If you do not have your own attorney at the closing, you may want to consider bringing a trusted advisor or friend with you.

Do I need to do anything before I call a housing counselor?

Before speaking with a housing counselor, you should collect as much of your financial information as possible, including:

  • Your last mortgage loan statement and any other recent information sent by your mortgage loan servicer
  • Your recent pay stubs and tax returns
  • A list of your household expenses, debt and other loans and payments

If you cannot find some or all of these items, a housing counselor can help you figure out how to obtain the information you need. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

Do I still need to pay my property taxes and home insurance with a reverse mortgage loan?

Reverse mortgage loans do not change your obligation to pay your homeowner’s insurance and taxes. If you don’t pay your insurance and taxes, or if the property condition deteriorates and you do not make necessary repairs, your loan becomes due.  The lender could foreclose on your home if you cannot pay back the loan and interest in full.

TIP: If you need help paying your property taxes or are looking to make a home repair or home improvement, you may qualify for a low-cost, single-purpose loan in your area or other assistance. Area Agencies on Aging (AAAs) generally know about these programs. To find the nearest agency, visit their website or call 1-800-677-1116. Ask about “loan or grant programs for home repairs or improvements,” or “property tax deferral” or “property tax postponement” programs, and how to apply.

You can also call your local county tax assessor and ask about senior “circuit breaker” programs, which are government-funded programs that may provide a direct cash grant or tax credit to help people over 65 to pay property taxes, mobile home taxes, rent or nursing home charges.

Does a HELOC affect my ability to refinance my first mortgage loan?

Taking out a HELOC can affect your ability to refinance. Once you take out a HELOC, you may have to get approval from your HELOC lender in order to refinance your first mortgage loan. HELOC lenders can refuse to allow you to refinance your first mortgage loan. If your HELOC lender refuses to let you refinance, you may need to pay off the HELOC in order to refinance.

Does a lender or broker have to consider my part-time or retirement income?

A creditor such as a lender or broker cannot discount or refuse to consider your (or your spouse’s) income because it comes from part-time employment. A lender or broker also cannot discount or refuse to consider income that is an annuity, pension, or other retirement benefit. Like all other forms of income, however, a lender or broker can consider the amount of the income and likelihood that it will continue.

How can I determine how long it will take me to pay off my loan?

You can find the amount of time that you will have to repay your mortgage in several places, including:

  • Your Good Faith Estimate, on page one, in the “Your loan term is” box, in the “Summary of Your Loan” Section
  • Your note
  • Your HUD-1 Settlement Statement, on page three, in the “Summary of Your Loan” section

How can I figure out if I can afford to buy a home and take out a mortgage?

Focus on a mortgage that is affordable for you given your other priorities, not how much you qualify for.

Lenders will often tell you how much you are qualified to borrow – that is, how much they are willing to loan you. Several online calculators will compare your income and debts and come up with similar answers based on standard ratios. But how much you could borrow is very different from how much you can afford to repay without stretching your budget for other important items too thin. Lenders do not take into account all your family and financial circumstances.

To know how much you can afford to repay, you’ll need to take a hard look at your family’s income, expenses and savings priorities to see what fits comfortably within your budget. Also, remember that your monthly payment could change in the future, depending on what type of mortgage loan you have. Consider how future, higher mortgage payments will fit in with your budget.

Tip: Don’t forget other mortgage- and home-related costs when determining your ideal payment. Homeowner’s insurance, property taxes, and possibly private mortgage insurance or homeowners association fees are typically added to your monthly mortgage payment, so be sure to include these costs when calculating how much you can afford. There may also be costs for repairs and maintenance of your home. You can get estimates from your insurance agent, local tax assessor, homeowners association, and lender. Knowing how much you can comfortably pay each month will also help you estimate a reasonable price range for your new home.

Tip: Don’t sacrifice savings in order to buy a bigger house. When reviewing your budget to determine an affordable mortgage payment, don’t forget about your savings. You likely will still need to save for emergencies, retirement, college for the children, and other priorities even after you’re a homeowner. Consider adding more money to your emergency fund or household fund to avoid going into debt to pay for sudden repairs, expensive replacements, or other necessities.

How can I tell if I am working with a mortgage broker or a mortgage lender?

Some financial institutions operate as both lenders and brokers, so you should ask whether a broker is involved in your loan transaction. Most brokers are paid a fee for their services on a specific loan. The fee may be in the form of a commission or other payment from you or the lender. Just as with lenders, you can and should shop around for brokers.

How can I tell who owns my mortgage?

You can send a written request to your servicer asking for information about the identity of the mortgage loan note holder. The servicer is obligated to provide you, to the best of its knowledge, with the name, address, and telephone number of the owner of your loan. In addition, whenever the owner of your loan transfers it to a new owner, the new owner is required to send you a notice telling you its name, address, and telephone number, along with other information.

How can I understand how much my payment could change if I receive a different interest rate?

The tradeoff table on page three of your Good Faith Estimate (GFE) can help you understand how much your loan payments could change if you pay more settlement charges and receive a lower interest rate or if you pay lower settlement charges and receive a higher interest rate.

Your loan originator must complete the left-hand column of the table with information from your GFE. You can ask your originator if they have the same loan product available with a higher or lower interest rate and, if they do, you can ask them to complete the remaining columns with information about those products for you although they are not required to do so.

TIP: Use the shopping chart on page three of your GFE to compare the features of similar loans offered by different originators. Fill in each column with information from the “summary of your loan” section from the first page of all your GFEs. Compare the costs, fees and rates associated to find the loan that makes the most financial sense for you.

How do I figure out if the person I am speaking with is a HUD-approved housing counselor?

You can check whether a housing counselor is approved by the Department of Housing and Urban Development (HUD) by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).

How do I figure out what my monthly payment for a mortgage loan will be?

You can estimate your monthly mortgage payment if you know some basic information.

  • How much do you plan to borrow?
  • What is the loan’s interest rate?
  • How long do you have to repay your loan (for instance, 15 or 30 years)? 
  • Is private mortgage insurance required?
  • Will the loan require an escrow account to pay for property taxes and homeowner’s insurance?

Your monthly payment will also likely include payments toward your escrow account (if you have one) for property taxes, homeowner’s insurance, and, when required, mortgage insurance. You can get estimates for these costs from your local tax assessor, insurance agent, and lender.

Your Good Faith Estimate (GFE) will estimate what your initial monthly payment will be for your loan principal, interest, and any mortgage insurance. It will also explain whether you are required to have an escrow account. Your initial Truth-in-Lending disclosure should also provide estimates of monthly payment information.

TIP: You should also make room in your budget for other monthly costs, like utilities, that are not part of your monthly mortgage payment but are part of the cost of owning a home.

TIP: When trying to figure out how much a mortgage will cost, don’t just focus on the initial monthly payment. Also look at:

  • Whether the payment can go up
  • How high it can go
  • How long it will take you to pay off your loan
  • Other fees and costs you will have to pay, such as closing costs, property taxes, and insurance

How do I find a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor?

There are different ways to find a HUD-approved housing counselor:

  • Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor over the phone
  • Call the HOPE™ Hotline, open 24 hours a day, 7 days a week, at 888-995-HOPE (4673)

How do I find an attorney in my state?

Your legal aid office may have information for you in their office or on their website. You also may qualify for free legal services through legal aid, depending on your income and where you live. Check your state’s Legal Aid Directory: 

 

Alabama

Alabama Legal Aid Directory: Directory of Legal Services Attorneys

Alaska

Alaska Legal Aid Directory: Directory of Legal Services Attorneys

Arizona

Arizona Law Help: Directory of Legal Services Attorneys

Arkansas

Arkansas Legal Services Partnership: Directory of Legal Services Attorneys

California

California Legal Services: Directory of Legal Services Attorneys

Colorado

Colorado Legal Services: Directory of Legal Services Attorneys

Connecticut

Connecticut Network for Legal Aid: Directory of Legal Services Attorneys  

What a Tenant Needs to Know

Delaware

Delaware Legal Services: Directory of Legal Services Attorneys

District of Columbia

District of Columbia Legal Services: Directory of Legal Services Attorneys

Florida

Florida Legal Services: Directory of Landlord-Tenant Legal Services Attorneys

Georgia

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How do I find the best rates available when I’m shopping for a mortgage loan?

Shopping around for a mortgage loan will help you get the best deal. The Internet is a good place to start your search. By doing a broad online search for mortgage rates in your area, you will get a good sense of the market.

Next, contact banks, credit unions, or other lenders and mortgage brokers in your area. Ask each lender or broker you call for a list of current interest rates for their available mortgage loans and whether the rates being quoted are the lowest for that day or week. You should ask whether the rates given for various products are fixed or adjustable, and what points or fees go along with different rates. You may also want to ask about each loan’s annual percentage rate (APR). The APR tells you the yearly cost of the loan based on the interest rate as well as points, broker fees and certain other charges that you may be required to pay, including certain of your closing costs.

There are many different types of mortgage loans available, so be sure you understand all of your options. If you are a veteran or servicemember, you may qualify for a VA loan. If you have concerns about your credit history or ability to make a down payment based on your income, you may qualify for an FHA loan. With all of the options out there, it is important to shop around and take the time to understand the terms of the different loans offered to you.

TIP: Ask these questions to better understand your loan offer:

  • Is the interest rate fixed or adjustable?
  • Do I need to pay points?
  • What is the term of the loan?
  • How much will my payment be and will it pay off my principal?
  • What other costs will be added to my monthly payment?
  • Can I repay the loan early without penalty?
  • Will the payments change over the life of the loan? How high can my payment go?
  • For an adjustable rate mortgage, are the payment adjustments and the interest rate capped?
  • How much will I need to put down?
  • Does the written offer match what I was told about the loan?

How do I know that a reverse mortgage is a good idea for me?

Here are some questions you could consider and talk to your family about before applying for a reverse mortgage.

  1. Is there another, cheaper way for you to achieve your financial goal?

    Before tapping into your home equity, see if you can find a way to lower your expenses. If you need extra money to cover living expenses, see if you qualify for a state or local program to lower your bills. You might also consider downsizing to a more affordable home.

  2. Do you need to tap into your home equity now or should you save it for an emergency?

    Home equity is often the last resource to turn to in a financial emergency. It is best to wait until then if you can.

  3. Are you on a fixed income with no other assets?

    If your income is very low, a reverse mortgage may not be the best option. If you take a reverse mortgage and then can’t pay your property taxes and homeowner’s insurance, you could face foreclosure. A different choice for you to consider is selling and downsizing. If you sell your home, you can use all of your equity to move to a more affordable home.

  4. Do you have children or other heirs to whom you plan to leave your home?

    Taking out a reverse mortgage can jeopardize your ability to leave your home to your heirs. If this is a priority for you, think twice about a reverse mortgage.

  5. How long do you and your family intend to live in the home?

    In most cases, a reverse mortgage makes more sense if you plan to remain in your home a long time. Most reverse mortgages require you to pay insurance premiums so that if the loan balance grows higher than your home is worth, you won't have to pay the excess. If you don't plan to remain in your home for a long time, there may be cheaper ways for you to achieve your goals.

  6. How much will it cost you in fees to obtain a reverse mortgage?

    Fees vary depending on the reverse mortgage product you choose. Fees and other charges can be high in some cases, so it is important to shop around for the best deal.

  7. How will you pay for property taxes and homeowner's insurance?

    It is important to have a plan for paying your property taxes and homeowner’s insurance as long as you live in the home. If you fall behind on either of these, the lender could foreclose on your reverse mortgage and you could be forced to move.

  8. Does your spouse wish to remain in the home if you die?

    Discuss this question carefully with your spouse or partner. If you take out a reverse mortgage without adding your spouse as a co-borrower, your spouse will have to move out or repay the loan if you die. By co-borrowing, your spouse will be able to remain in the home indefinitely.

TIP: Talk to a Department of Housing and Urban Development (HUD)-approved housing counselor if your are considering a reverse mortgage. You can find a HUD-approved housing counselor by visiting HUD's counselor search page or calling HUD’s housing counselor referral line (1-800-569-4287). HUD-approved counselors may charge a fee, typically $125 or less.

TIP: Be careful about taking out a reverse mortgage as part of an investment strategy. There is no such thing as a risk-free or guaranteed investment. You should think twice about borrowing against your home to invest. All investments can lose value and that could put your home at risk if you cannot keep your home in good repair or pay your property taxes or homeowner’s insurance later on.

How do I receive the money from a reverse mortgage loan?

How you receive the money from a reverse mortgage depends on the type of loan, the lender you choose, and the payment option you select.

Most reverse mortgages today are insured by the Federal Housing Administration (FHA) as part of its Home Equity Conversion Mortgage (HECM) program. With a HECM loan, you can receive your money as a line of credit, monthly installments, a lump sum, or certain combinations of these options.

The line of credit option allows you to draw on your loan, up to the maximum amount, at the times and amounts that you choose. You will only be charged interest on the amount of money you take out. You will not be charged interest on the money remaining in your credit line.

This payout option also features credit line growth. If you do not take out all of your money at once, the amount you can borrow later will be larger. As long as you uphold the terms of your reverse mortgage, your credit line can never be frozen or canceled.

The monthly “tenure” option allows you to receive a monthly cash advance from your lender for as long as you continue to live in your home. 

The monthly “term” plan is a similar option, but you only receive monthly cash advances for a fixed number of years.  The cash advances will be larger than under the “tenure” option, and you get to choose how many years you would like.

You can combine a line of credit with either the monthly tenure or monthly term cash advances.

With the fixed-rate, lump-sum option, you must take the full amount of your loan right away.  Interest begins compounding on the entire amount immediately, even if you don’t use the money. Think carefully before taking this option.

Once you have selected a payout option, you may be able to change it for a fee – as long as you haven’t drawn all of your funds already.

TIP:  Think carefully before cashing out all of your hard-earned equity with a lump-sum reverse mortgage.  To make sure you select the payout option that best fits your needs, talk to a housing counselor approved by the U.S. Department of Housing and Urban Development (HUD).  You can find a HUD-approved counselor by visiting HUD’s counselor search page or calling HUD’s housing counselor referral line (1-800-569-4287).

If you are considering a proprietary (non-FHA insured) reverse mortgage, make sure you understand your options for receiving your money, as they may differ from HECM loans.

How do I tell if I have a fixed- or adjustable-rate mortgage?

If you have the papers that you signed when you got your loan, look for the paper that says “Note” or “Contract.”

If you have an adjustable rate mortgage your note should have the words “Adjustable Rate Note” and may include language similar to: “I will pay interest at a yearly rate of__ percent. The interest rate I will pay will change in accordance with Section __ of this Note.”

If you have a fixed rate mortgage, your Note may include language similar to: “I will pay interest at a yearly rate of __ percent.”

Another way to tell if you have a fixed or adjustable rate mortgage is to look at the Truth in Lending Disclosure statement that you should have received during your loan closing. Look for language along these lines: “Your loan contains a variable-rate feature. Disclosures about the variable-rate feature have been provided to you earlier.” If this language is on the disclosure, you have an adjustable rate mortgage.

How does foreclosure work?

Foreclosure processes differ by state. If you are worried about foreclosure, you should call the CFPB at 1-855-411-CFPB (2372) to be connected with a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor.

Typically, once you fall three months behind on your mortgage payments, the foreclosure process may begin (although the process can begin earlier or later). The foreclosure process may proceed in one of three ways depending on your state: judicial sale, which requires that the process go through court; power of sale, which can be carried out entirely by the lender; or strict foreclosure, which is only available in a few states and requires the lender or a servicer acting on the lender’s behalf to file a lawsuit against the borrower.

All types of foreclosure generally involve public notice to be given and require all parties to be notified regarding the proceedings. States laws on giving notice and scheduling a foreclosure sale vary. Some states may also provide you with the right to mediation prior to foreclosure. Be sure to read your mail carefully and act promptly on notices you receive.

For a list of foreclosure resources by state, please visit the HUD’s website. Military members or veterans can call the U.S. Department of Veterans Affairs (VA) or visit the VA’s home loan website to get personalized assistance. If you believe you are in need of an attorney, or if you have been served with a notice of foreclosure or other related legal document, you may be able to find legal aid in your state for legal representation available at little or no cost to you. If you need help finding an attorney, you can view this list of legal aid services in your state, or you can find lawyer referrals in your county and state by visiting the American Bar Association website.

Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through HUD's Housing Counseling Program. To learn more, call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

How does my credit score affect my ability to get a mortgage loan?

When you apply for a mortgage loan, the lender looks at a number of factors to decide if you are likely to repay the loan. Some of these factors are:

  • Credit report
  • Credit score
  • Credit history with that lender
  • The amount of debt you already have
  • How much you have in savings
  • Your total assets
  • Current income
     

Usually, the lower your credit score is, the more you will have to pay in interest.

TIP: Don’t apply for a lot of new credit in a short time, especially if you are getting ready to get a mortgage. Doing so may negatively affect your score. Your credit score may decline if you have too many credit accounts. It can also go down if you apply for or open many new accounts in a short time. However, when you request your own credit report, or when your existing creditors check your credit report, those requests to see your credit report should not hurt your score.

How is a reverse mortgage different from a traditional mortgage?

A traditional mortgage is used to buy or refinance a home. The lender lends you the money to buy or refinance the home, and in exchange you promise to pay back the lender the money you borrowed, plus interest, over many years.

A reverse mortgage is used to get cash out of your home. Instead of borrowing to buy a home, you are borrowing against a home you already own. By borrowing against your home, you are able to use the wealth stored in your home now, and pay back the loan when you die or sell the home. 

Reverse mortgages are designed for senior homeowners who want to access their home equity (the wealth stored in their homes). In order to get a reverse mortgage you must be at least 62 years old and have paid off some or all of your mortgage.

Unlike traditional mortgages, reverse mortgages do not require monthly mortgage payments. The interest and fees on the mortgage are added to your loan balance each month. Over time, your home equity will decrease as your loan balance grows. It’s the reverse of a traditional mortgage. 

TIP: It's your house. Understand what you could be putting at risk. Before you do anything that would put your home on the line, make sure you understand how the loan works. A good way to check your understanding is to see if you understand it is to see if you can explain it to a friend or family member in your own words.

Be careful when considering a reverse mortgage. There are many factors to consider, including your age, your financial needs and goals, and how long you expect to stay in the house. If you decide it makes sense for you to take out the loan, learn about all the fees and compare interest rates before you sign anything.

  • Downloading this helpful consumer guide from the CFPB's Office of Financial Protection for Older Americans.
  • Talk to a reverse mortgage counselor. Find a HUD-approved counselor by visiting HUD’s counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).
  • How long do I have to rescind? When does the right of rescission start?

    Unless you waive your right of rescission, you have until midnight of the third business day after the transaction to cancel the contract. The first day after all three of the following events occur counts as day one:

    1. You sign the credit contract
    2. You receive a Truth in Lending disclosure form containing certain important disclosures about the credit contract that explain the key terms of the credit being offered – the annual percentage rate, the finance charge, the amount financed, the total of payments, and the payment schedule
    3. You receive two copies of a notice explaining your right to rescind

    For rescission purposes, business days include Saturdays, but not Sundays or legal public holidays. For example, if the last of the above three events occurs on a Friday, you have until midnight on the following Tuesday to rescind.

    You may use the form provided to you by the creditor or a letter. Whatever form of written notice you use, make sure it is delivered or mailed before midnight of the third business day.

    How much money can I get from my home with a reverse mortgage?

    Generally, the size of the loan you will be able to borrow will be larger the older you are, the more valuable your home is, and the lower the interest rate. Determining how much you can borrow from your home with a reverse mortgage is difficult without looking at your specific situation. Reverse mortgage calculators can help you get a general idea of how much you may be eligible to borrow.  The National Council on Aging provides a reverse mortgage calculator and other resources online.

    TIP: Just because you can borrow a large sum does not mean that’s the best choice for you. Talk to a reverse mortgage counselor. You can find a HUD-approved housing counselor by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).

    How will I know whether the National Mortgage Servicing Settlement affects my situation?

    The settlement provides assistance for:

    • Homeowners needing loan modifications now, including first and second lien principal reduction.
    • Borrowers who are current but owe more on their loan than the market value of their home may be able to refinance at today’s historically low interest rates.
    • Borrowers who lost their homes to foreclosure.

    Because the agreement will be implemented over a three-year period, borrowers may not immediately know if they are eligible for relief. Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement. Additional information is available at http://www.nationalmortgagesettlement.com/.

    I am a servicemember or veteran and I have decided to purchase a home. How do I know if a VA loan is the right fit for me?

    You should consider the advantages and disadvantages of getting a U.S. Department of Veterans Affairs (VA)-guaranteed loan. Some of the advantages, once you qualify, include the ability to buy a home with no down payment (as long as the sales price doesn’t exceed the appraised value), as well as the absence of the private mortgage insurance (PMI) requirement. PMI may cost up to one percent of the loan amount each year. The VA loan program also limits the closing costs you may be charged and gives you the right to prepay your mortgage without a penalty. Also, the VA may be able to offer you some assistance if you run into temporary financial difficulties.

    There may be disadvantages to a VA loan. For example, a VA loan could have a higher interest rate than a conventional loan, although interest rates on VA loans are negotiable. In addition, most borrowers are required to pay a VA loan funding fee (currently between one and three percent of the amount of the loan). Also, opting for a loan without a down payment makes it important that you plan to stay in the home for a while because a drop in home values could quickly put you “upside down” on your mortgage, leaving you owing more than the home is worth. The larger the down payment you are able to make, the more cushion you have to prevent this from happening. For more information go to the VA’s home loan program’s website or contact your local legal assistance office.

    Do your homework! Your real estate agent, broker or lender may not always understand the unique needs of servicemembers and their families.

    I am a servicemember or veteran and I’ve already bought and sold one house that was financed through a VA loan. Can I qualify for another VA loan?

    Generally, your VA loan eligibility can be restored if you have paid off your prior VA loan even if the person who assumed it was also eligible for the benefit. Once your eligibility is restored, you may qualify for another VA loan. To learn more about eligibility or for any other question regarding the program, please visit the VA’s home loan program’s website.

    I am a servicemember or veteran. Will I be able to get a conventional or VA mortgage on a manufactured home?

    VA-guaranteed home loans are available for manufactured homes, though maximum loan amounts vary. Please access the VA’s website or call 1-877-827-3702 for further assistance.

    Manufactured homes are also eligible for government-insured loans offered by the Federal Housing Administration (FHA) and the Rural Housing Services (RHS) under the U.S. Department of Agriculture. As with conventional mortgages, there are many factors involved in determining the loan amount you will qualify for under these programs. These factors include:

    • State laws
    • Whether the home is attached to the land
    • Whether you are also purchasing the land
    • Neighborhood covenants

    Make sure you consult more than one lender. Don’t take the deal offered by the company selling the home without careful comparison.

    Also, keep in mind that manufactured home values have been known to drop faster than those for site-built homes. If you receive Permanent Change of Station (PCS) orders, it may be challenging to sell your manufactured home for enough to pay off your debt, even in a favorable real estate market. Moving the home to your new location may not be feasible or may be very expensive.

    If you’d like advice as you consider whether to buy a manufactured home, consult your installation’s Personal Financial Management Program (PFMP) counselor, Legal Assistance Office or military housing office. You can find your nearest PFMP office online by selecting “Personal Financial Management Services” in the “Program or Service” drop-down box.

    I am a veteran with either a VA-guaranteed mortgage or a non-VA-guaranteed mortgage and am having trouble making my payments. Who can I call for help?

    If you are a veteran, it is important to know that there are special resources available to you, regardless of when you served and even if you don’t have a VA-guaranteed mortgage. If you have a VA-guaranteed mortgage and are having trouble making your payments, the VA has a Loan Guaranty Home Loan Program to help you try to keep your home. Call (877) 827-3702 to reach the nearest Loan Guaranty office where loan specialists are prepared to discuss potential ways to help with your VA loan.

    If you are a veteran or servicemember with a non-VA loan, the VA can still provide you with helpful advice and guidance, including information on options for refinancing to a VA-guaranteed mortgage. For more information on the VA’s Loan Guaranty Home Loan Program, visit the VA’s website or call toll-free (877) 827-3702 to speak with a VA Loan Technician. For additional assistance, call the CFPB Consumer Hotline at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can provide further assistance.

    If this is an emergency, and you are a veteran who feels you may be facing homelessness as a result of losing your home, call (877) 4AID VET (877-424-3838) or go to the VA’s websiteto receive immediate assistance from VA.

    I am on active duty in the military or have been on active duty within the past year. Am I protected from foreclosure?

    The Servicemembers Civil Relief Act (SCRA) provides military personnel and their dependents protections when it comes to issues related to mortgages and housing.

    If you are on active duty and obtained a mortgage before you went on active duty (also known as a “pre-service mortgage obligation”), you generally cannot be foreclosed on without a valid court order (regardless of whether you told your lender or servicer acting on your lender’s behalf of your active duty status) while you are on active duty, as well as for an additional nine months after leaving active duty.

    The SCRA provides protection against default judgments (which are rulings against a party to a lawsuit because he or she didn’t appear in court) against a servicemember – including foreclosure cases before a judge – while on active duty. If you rent instead of own your home, the SCRA prevents eviction of servicemembers or their dependents without a court order during a period of military service, as long as your monthly rent is less than $2,975.54 (this is the limit for 2011).

    If you obtained a mortgage before you went on active duty, the SCRA requires your lender or servicer acting on your lender’s behalf to reduce your mortgage interest rate to 6 percent (including service charges and fees) for the entire time you are on active duty, and for an additional year after you leave active duty. Any interest above the six percent cap is forgiven, not deferred. To receive this interest rate reduction, you must provide your lender or servicer acting on your lender’s behalf with written notice and a copy of the orders calling you to active duty no later than 180 days after you leave military service.

    If you believe your rights under the SCRA have been violated, you should contact the nearest Armed Forces Legal Assistance Program office. If you are a dependent of a servicemember, you can contact or visit your local military legal assistance office. Go online to find an office within the continental United States or worldwide. For additional servicemember assistance and resources – even if you are no longer on active duty – visit the American Bar Association’s ABA Home Front.

    I am receiving many offers for new credit cards since I moved into my new home or took out my mortgage. Can I make the offers stop?

    Credit card issuers, auto finance companies, and other lenders or insurers can ask credit reporting agencies for a list of names and addresses of individuals who meet certain criteria (such as a minimum credit score). The credit reporting agency produces these lists by reviewing its credit files.

    If you do not want card issuers or other lenders and insurance companies to get your information in this way, you can opt out for five years by calling 1-888-5-OPTOUT (1-888-567-8688) or by visiting www.optoutprescreen.com. To opt out permanently, you must download and mail a signed Permanent Opt-Out Election form, available by calling 1-888-5-OPTOUT (1-888-567-8688) or by visiting www.optoutprescreen.com.

    If you opt out, your name will no longer appear on lists provided by credit reporting agencies. However, card issuers can still solicit you if they have done business with you before or they get your name from other sources and send you invitations to apply for a card.

    I am worried about my mortgage payments and facing a Permanent Change of Station (PCS) Order. Is there any assistance I can seek?

    The CFPB’s Office of Servicemember Affairs has been looking for programs and policies that might improve the options for military homeowners who are underwater on their mortgages and receive PCS orders.

    There have been some recent helpful developments. On September 30, 2011, the U.S. Department of the Treasury announced updated guidance to its Home Affordable Foreclosure Alternatives (HAFA) Program that may help servicemembers in some circumstances. HAFA pays incentives to eligible borrowers who use a short sale or a deed-in-lieu-of-foreclosure option to avoid foreclosure.

    Generally, to qualify for HAFA assistance, a homeowner must have a documented financial hardship and meet other eligibility criteria. Until recently, servicemembers who had not experienced a decrease in income would not qualify as having a “documented financial hardship.” Under its new guidance, however, servicemembers who cite a PCS order as the basis for their financial hardship when asking for help under HAFA will now be eligible for assistance, even if their income has not decreased. For more information, visit the Home Affordable Foreclosure Alternatives Program (HAMP) or call 888-995-HOPE.

    Additionally, Fannie Mae and Freddie Mac now say in their servicing guidelines that a PCS move is a qualifying hardship for loss-mitigation alternatives (a short sale, deed-in-lieu, or other foreclosure prevention). For more information relating to Freddie Mac’s PCS guidance and assistance for military families, visit Freddie Mac’s website.

    Fannie Mae announced a similar program in October 2011. The announcement can be read and printed here. Fannie Mae has also created a military web page, and set up a hotline (877-MIL-4566) to advise members of the military about the foreclosure prevention options available to them.

    Finally, if your house was purchased before July 1, 2006 and you received PCS orders dated February 1, 2006 through September 30, 2010 you may want to consider contacting the Department of Defense’s Homeowners Assistance Program (HAP) to find out if you are eligible for additional assistance.

    I applied for a loan and never received a response to my application. What can I do?

    Lenders are required to mail a Good Faith Estimate (GFE) to you within three business days after you completed your application. If a lender denies your application, it must mail you a notice of the denial within 30 days of receiving your completed application.

    If you do not receive either of these documents, first contact your lender and try to determine why there is a delay. You can also file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372). Note that if your lender denies your loan application within three business days after you completed it, your lender is not required to provide you with a GFE.

    You can also apply for a loan at another lender.

    I applied for a mortgage loan and my lender denied my application. What can I do?

    Don’t be discouraged. Another lender may approve you for a loan. Meanwhile, you should request an explanation from your lender as to why your application was denied. The lender is required to provide you this explanation in writing if you request it, and must to give you copies of the credit score upon which the denial was based.

    In addition, you may want to examine your credit by obtaining a credit report at no cost to you if you have not already done so to make sure there are no mistakes. You may also want to talk to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can help you evaluate your ability to pay for a mortgage loan.

    I applied for a mortgage loan, but my lender denied my application. I think that the lender discriminated against me. What are my rights under the law?

    The Equal Credit Opportunity Act (ECOA) makes it illegal for a creditor such as a lender or broker to discriminate in any credit transaction, including mortgage and home equity loans, against any applicant because of:

    • Race
    • Color
    • Religion
    • National origin
    • Sex (gender)
    • Marital status
    • Age (if the applicant is old enough to enter into a contract)
    • Receipt of income from any public assistance program
    • Exercising in good faith a right under the Consumer Credit Protection Act, which is a collection of consumer protection statutes relating to credit

    This means that a lender or broker may not use any of the above grounds as a reason to:

    • Refuse you a mortgage or home equity loan if you qualify for it
    • Discourage you from applying for a mortgage or home equity loan
    • Provide you a mortgage or home equity loan on terms that are different from the terms given to someone else who is similarly situated to you, such as having similar creditworthiness

    If you believe that you were discriminated against on any of these grounds, you can file an official complaint or tell us about your experience.

    You can file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    You can also tell us about your experience without filing a formal complaint.

    The Fair Housing Act also makes it illegal to discriminate against anyone who is seeking a mortgage, home equity loan, or loan to build, repair, or improve a home on the basis of:

    • Race
    • Color
    • Religion
    • National origin
    • Sex (Gender)
    • Handicap (Disability)
    • Familial Status

    If you believe that your lender or broker discriminated against you on one of these bases when you sought a mortgage, home equity loan, or a loan to build, repair or improve a home, in addition to filing a complaint with the CFPB, you can also file a complaint with the U.S. Department of Housing and Urban Development (HUD).

    State or local law may prohibit discrimination on additional grounds. If you think you may have been a victim of discrimination, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I can’t make my mortgage loan payments or sell my home. What should I do?

    If you can’t make your mortgage payment, in some cases you can give your home back to your mortgage lender through a process called “deed-in-lieu of foreclosure.” You may also qualify for help with relocation expenses, either under the federal government’s Home Affordable Foreclosure Alternatives Program (HAMP)  or other programs sometimes called “cash-for-keys.”

    If you live in a state in which you are responsible for any deficiency between the value of your property and the amount you still owe on your mortgage loan, you will want to ask your lender to waive the deficiency. If the lender waives the deficiency, get the waiver in writing and keep it. To learn more, call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I can’t pay my mortgage loan. What should I do?

    If you can’t pay your mortgage, call your servicer right away. Your servicer may be willing to help you if you have missed a payment or are about to miss a payment. However, the further you fall behind in your payments, the harder it will be for you to work out an agreement with your servicer to help you stay in your home.

    You can find the telephone number for your mortgage servicer in your monthly mortgage loan statement. If you don’t get a monthly mortgage statement, look in the mortgage loan coupon book your lender gave you. You can also search the Mortgage Electronic Registration Systems (MERS) or call them toll-free at 888-679-6377 to find the company that services your mortgage.

    When you call, be prepared to explain:

    • Why you are unable to make your payment
    • Whether the problem is temporary or permanent
    • Details about your income, expenses and other assets like cash in the bank

    If you can’t make your mortgage loan payment, in addition to talking to your servicer, talk to a housing counselor about your options. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I disagree with my servicer about the amount they say that I owe. What can I do?

    If you disagree with your servicer about how much you owe, you can start by sending your servicer a QWR explaining why you think that it made a mistake. You can use this sample QWR letter to make the request.

    Remember to:

    • Make sure that your QWR is sent to the address that the servicer uses for receiving QWRs
    • Send the QWR separate from your mortgage payment
    • Send the QWR certified mail, return receipt requested so you will have confirmation that your QWR arrived
    • Continue to make your scheduled mortgage payments

    I don't know what to say when I call my servicer. Can someone help me?

    If you do not know what to say or are uncomfortable talking to your mortgage servicer, a U.S. Department of Housing and Urban Development (HUD)-approved housing counseling agency can help you understand your options, and help you learn how to talk effectively with your servicer. To find a HUD-approved housing counselor today, call the CFPB at 1-855-411-CFPB (2372).

    I got divorced, and my lender terminated my home equity line of credit. Can they do that?

    With respect to open-end accounts (like home equity lines of credit) for which you are responsible, a creditor such as a lender generally may not make you reapply, change the terms of your account, or close your account because you reached a certain age, retired, changed your name, or changed your marital status.  

    A lender may require you to reapply if your marital status changed, if you originally qualified for the account based on your spouse’s income, and if your income alone may not support the amount of credit currently available on the account. While a reapplication is pending, the lender must allow you full access to the account. The lender may specify a reasonable time period to reapply.

    A lender may also close an account on which you and your spouse are jointly liable when one or both of you tell the lender you are no longer willing to be responsible for future charges, request separate accounts, or request that the account be closed. The lender may do so even if this occurs at the same time as a change in your marital status.

    I heard about the National Mortgage Settlement or Attorney General Settlement. Can you tell me more about it?

    The federal government and 49 state attorneys general have entered into a $25 billion agreement with the nation’s five largest mortgage servicers to provide substantial financial relief to homeowners and establish significant new homeowner protections for the future. The state of Oklahoma has a separate agreement. The five participating servicers are:

    • Bank of America Corporation
    • JP Morgan Chase & Company
    • Wells Fargo & Company
    • Citigroup, Inc.
    • Ally Financial Inc. (formerly GMAC)

    Additional information is available at http://www.nationalmortgagesettlement.com/.

    I heard about the new Federal Housing Authority refinancing option with reduced fees. Can you tell me more about it?

    On March 6, 2012, the President and the Federal Housing Administration (FHA) announced price cuts to FHA's Streamline Refinance Program. The cuts will be available beginning June 11, 2012. To qualify, you must be current on your existing FHA-insured mortgage, and the mortgage must have been endorsed on or before May 31, 2009.

    The FHA estimates the average FHA-insured borrower could save approximately $3,000 per year or $250 per month by refinancing through this streamlined process.

    The FHA Streamline Refinance does not require additional underwriting. FHA-insured homeowners should contact their existing lender to determine their eligibility.

    I heard the President announce new housing relief for servicemembers and veterans. Can you tell me more about this?

    On March 6, 2012, President Obama announced relief that will be provided to thousands of servicemembers and veterans by the major mortgage servicers included in the National Mortgage Settlement that was announced in February. This relief includes:

    • Compensating servicemembers wrongfully foreclosed upon
    • Compensating servicemembers wrongfully charged higher interest rates
    • Providing relief for servicemembers forced to sell their home at a loss due to a Permanent Change of Station (PCS) orders
    • $10 million for the Veterans Housing Benefit Program
    • Foreclosure protections for servicemembers receiving hostile fire/imminent danger pay

    The United States Department of Veterans Affairs website contains additional information regarding the Servicemembers Civil Relief Act (SRCA), including details on SRCA Relief in the Mortgage Settlement. The major mortgage servicers included in the settlement are:

    • Bank of America Corporation
    • JP Morgan Chase & Company
    • Wells Fargo & Company
    • Citigroup, Inc.
    • Ally Financial Inc. (formerly GMAC)

    Servicemembers who believe their rights were violated by any of the participating mortgage servicers can contact the Justice Department directly at 1-800-896-7743. Servicemembers and their dependents who believe their SRCA rights have been violated may also contact the nearest Armed Forces Legal Assistance office. Additional information on the National Mortgage Settlement that was announced in February is available at http://www.nationalmortgagesettlement.com/.

    I inherited the house and the servicer won’t talk to me. What can I do?

    You may want to consult with an attorney. Surviving spouses or children who inherit a house may be able to assume the mortgage loan for that home. You may need to give the servicer a copy of the death certificate and show proof that you inherited the home. That proof might be a letter from the executor of the owner’s estate. Call 1-855-411-CFPB (2372) to learn about HUD-approved housing counseling options that may be available to you.

    If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I live in the state of Oklahoma. How can I find out more information about the National Mortgage Servicing Settlement?

    Borrowers from Oklahoma will not be eligible for any of the relief directly to homeowners because Oklahoma elected not to join the settlement.

    Oklahoma homeowners who wish to comment or file a complaint for foreclosure relief consideration, may call the state Attorney General’s Public Protection Unit at (405) 521-2029, e-mail PublicProtection@oag.ok.gov, or go online to the Oklahoma Mortgage Settlement Page.

    Homeowners who believe they may have been wrongly foreclosed upon will need to visit the Attorney General’s website and fill out the necessary paperwork for processing a claim.

    I lost my job and can’t make my mortgage loan payments. What can I do?

    If you’re unemployed, there are federal programs – Home Affordable Unemployment Program or the Hardest Hit Fund – that are designed to help homeowners who have lost their jobs. Foreclosure prevention counseling and homeless counseling services are available free of charge through the U.S. Department of Housing and Urban Development (HUD)'s Housing Counseling Program. Find out if you qualify for one of these programs or what other options you might have by calling the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I mailed my mortgage payment before it was due but my servicer received it after the due date and charged me a late fee. Can my servicer do this?

    Yes, your servicer can charge you a late fee if it receives your payment after the due date, even if you mailed your payment on time. Most servicers do not go by the postmark on your payment envelope but by when they receive your payment, though some states have laws that may regulate servicers’ assessments of late fees.

    Be sure you allow time for transit when you mail your payment. If your servicer receive your payment before the due date, but delayed posting it until after the due date, charging late fees is inappropriate. Should the servicer refuse to remove the fee, you can file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    I never received a “Good Faith Estimate” or GFE. What can I do?

    If you did not get a Good Faith Estimate within three business days of the receipt of your loan application, contact your lender or mortgage broker and ask if it has been sent and when it was sent. The lender is not required to provide a GFE if your application was denied before the end of the three-business-day period.

    If they refuse to give you a GFE or if it was not provided to you within three business days after the lender or mortgage broker received your complete loan application (and the lender did not deny your application during the three-business-day period), file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372). You can also apply for a loan from another lender.

    I paid off my mortgage but it is still listed on my credit report as outstanding. What can I do?

    You should file a dispute with the credit bureaus about the error. You can alsofile a complaint with the CFPB onlineor call 1-855-411-CFPB (2372) to file a complaint and be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor.

    I received a bill from my city or county saying that my servicer did not pay my taxes. What can I do?

    If this happened to you, you can send a copy of the bill along with a Qualified Written Request (QWR) to your servicer describing the issue. Meanwhile, if the servicer has failed to make timely tax and insurance payments on your behalf, you should contact your tax authority or insurance carrier as soon as possible. Although the servicer may be at fault, failure to pay taxes may result in a tax lien on your property and the lapse of insurance coverage may result in you paying for costly force-placed insurance. 

    If your servicer fails to make escrow account disbursements on time, you should consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    You can also file a complaint with the CFPB online or call 1-855-411-CFPB (2372) to file a complaint and be connected to a HUD-approved housing counselor.

    I saw an ad for a no-payment reverse mortgage from the Department of Veterans Affairs (VA). Is this for real?

    No. The VA does not offer no-payment reverse mortgages.

    Some mortgage lenders run misleading ads directed at veterans that promise special deals, imply VA approval, or offer of a “no-payment” reverse mortgage to attract older Americans who are desperate to stay in their homes.

    You should look out for and avoid loans that are advertised with:

    • Official-looking logos implying that the loan comes from a government agency like the VA or the Department of Housing and Urban Development (HUD). Government agencies guarantee some loans, but they do not lend directly.
    • Promises of amazingly low rates – Offers of rates as low 1.9 percent for “VA refinancing” may turn out to only be in effect for a short period of time.
    • Promises that a reverse mortgage will let veterans stay in their home payment-free. Typically borrowers with these mortgages must still pay their taxes and insurance and could lose their homes if they don’t.
    • Announcements of “pre-approval” and large amounts of cash or credit available to you. Typically there’s no guarantee that a borrower will be approved for a loan, or the size of the loan, this early in the process.

    I talked to someone who promised I could stay in my home if I paid him or her to help me. Is that true?

    Beware of anyone who promises you can stay in your home or who asks for a lot of money to help you. Scammers might promise guaranteed or immediate relief from foreclosure, and they might charge you very high fees for little or no services.

    Mortgage relief companies may not collect any fees until they have provided you with a written offer from a lender or servicer that you decide is acceptable and a written document from the lender or servicer describing the key changes to the mortgage that would result if you accept the offer. The companies also must remind you of your right to reject the offer without any charge.

    Don’t get scammed. There is help available at little or no cost to you. Foreclosure prevention counseling is available free of charge through HUD's Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today or to submit a complaint with us. You can also submit a complaint online.

    If you think you may have been a victim of a mortgage relief scam, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I think I’ve been scammed by someone promising to help me with my mortgage loan. What should I do?

    Report the scam by submitting a complaint with the CFPB online or calling 1-855-411-CFPB (2372) to file a complaint and be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    If you think you may have been a victim of a mortgage loan modification scam, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I want to apply for a mortgage or home equity loan. Can a lender or broker ask me about my children or dependents?

    A creditor such as a lender or broker may ask about the number and ages of your dependents. A lender or broker may also ask about dependent-related financial obligations or expenses. However, a lender or broker may do so only if the creditor asks for this information without regard to sex or marital status (or any other prohibited basis).

    A lender or broker cannot ask you about your birth control practices. A lender or broker also cannot ask about your intentions concerning having or raising children or your capability to have children.

    Further, a lender or broker is prohibited from discriminating in a mortgage or home equity loan because of familial status. Familial status means one or more individuals (who have not attained the age of 18 years) being domiciled with a parent or another person having legal custody of the individual or individuals, or the designee of such parent or other person having such custody, with the written permission of such parent or other person. The protections afforded against discrimination on the basis of familial status also apply to any person who is pregnant or is in the process of securing legal custody of any individual who has not attained the age of 18 years.

    I want to sell my home, but I can’t get enough money in the sale to pay off my mortgage loan.

    You still may be able to sell your home, if your lender agrees to a short sale. If you choose this option, a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can help you plan your next steps.

    If you live in a state in which you are responsible for any deficiency between the sale price for your home and the amount you still owe on your mortgage loan, you will want to ask your lender to waive the deficiency. If your lender waives the deficiency, get the waiver in writing and keep it.

    You should also ask about help with relocation expenses, either under the federal government’s HAMP (the Home Affordable Modification Program) or other programs sometimes called “cash-for-keys.” To learn more, call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    I wanted to take out a Home Equity Line of Credit but my lender told me the terms have changed. What can I do?

    When you apply for a HELOC, the lender must give you important information about the terms and costs of your HELOC. This information includes the length of the draw and repayment periods, fees and costs you may be charged by the lender, an estimate of fees you may be charged by third parties to close the HELOC (such as appraisal fees), an explanation of how your minimum payment is calculated, and information about how the annual percentage rate may change.

    A creditor must refund all fees you paid if you tell the creditor that you do not want to open an account:

    • For any reason within three business days after you receive the application disclosures (as discussed above), or
    • Any time before your account is opened if any of the terms disclosed in the application disclosures change

    If the home used to secure your HELOC is your principal dwelling, then you have three business days from the day you open your account or the day you receive the account-opening disclosures (whichever is later) to change your mind and cancel your HELOC. You can change your mind for any reason. You just have to inform the lender in writing within the three-day period that you have changed your mind. The lender must then return all of the fees, including any fees to third parties, that you paid to open your HELOC.

    I was told I had to buy an annuity or an investment product to get a HECM reverse mortgage. Is this true?

    No. With some exceptions such as for title and homeowner’s insurance, a lender or broker cannot require you to buy an annuity or another financial product in order to qualify for a HECM reverse mortgage. If a lender or broker tells you that you have to buy another product such as annuity to get a HECM reverse mortgage, you should file a complaint with the CFPB, or call 1-855-411-CFPB (2372).

    Also, talk to a HUD-approved housing counselor if a lender or broker advises you to use the money from a reverse mortgage to buy an annuity, insurance, or an investment. You could end up paying high fees while losing money at the same time. You can also report this individual or company by contacting the CFPB at 1-855-411-CFPB (2372).

    I was told that I was too young to get a mortgage loan. Is this possible?

    A creditor such as a lender or broker cannot discriminate against a credit applicant because of age unless the applicant is too young to legally enter into a contract. State law governs the age at which an individual can enter into a legally binding contract.

    I’d like to refinance, but I think the value of my home has fallen. Is there a program for me?

    If the value of your home has fallen, the federal government’s Home Affordable Refinance Program (HARP) or the FHA Short Refinance Program may provide you with additional refinancing options. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can talk to you about your options today.

    If I am married, can a lender or broker turn down my application for a mortgage or home equity loan in my own name?

    If you are applying for individual credit in your own name, a creditor such as a lender or broker may not deny you credit because of your marital status. If you are creditworthy, you may get your own mortgage or home equity loan, and a lender or broker generally may not require that your spouse co-sign.

    If you apply for a mortgage or home equity loan, a lender or broker may require your spouse’s (or other person’s) signature on any instrument necessary to make the property being offered as security available to satisfy the debt if you were to fail to repay. For example, a lender or broker may require your spouse (or other person) to sign an instrument to create a valid lien or pass clear title.

    If I am in the United States military, what should I do if the house or apartment I’m renting goes into foreclosure?

    Federal laws – the Servicemembers Civil Relief Act (SCRA) and the Joint Federal Travel Regulations (JFTR) – provide consumer protections for servicemembers.

    • If you are on active duty in the United States military and the house or apartment you are renting goes into foreclosure, you are prevented from being evicted without a court order. So if the new owner wants to evict you from the property, they can’t do so without a court order. But this protection, the SCRA, only applies if the property is being used primarily as your residence or your dependents’ residence and the monthly rent is less than $3,139.35 in 2013.  (This is a 2013 figure – the amount changes every year based on inflation.) The landlord is, however, entitled to payment.
    • If you are on active duty in the military and are forced to move because of a foreclosure action against your landlord (because the new owner did, in fact, obtain a court order), the JFTR authorizes the military to pay for your move to another residence near your previous apartment or rental home.

    The legal assistance office of the Judge Advocate at your military base or duty station can help you to enforce the protections described above. Legal assistance offices in the Continental United States can be found using the U.S. Armed Forces Legal Assistance Locator.

    If I call a housing counselor, does that mean I will be able to stay in my home?

    If you are having trouble paying your mortgage, a legitimate housing counselor cannot promise that you will get to keep your home. A housing counselor can help you look at your options and make a decision that’s right for you. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    If I call the CFPB because I can’t pay my mortgage loan, what will happen?

    When you call the CFPB at 1-855-411-CFPB (2372), you will hear a list or menu of options. If you are having trouble making your mortgage loan payments, are in default, or have received a notice of foreclosure, follow the prompts to be connected to the Homeowner’s HOPE™ Hotline, where you will be able to speak with a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor.

    If I can't pay my mortgage loan, what are my options?

    A U.S. Department of Housing and Urban Development (HUD)-approved housing counselor may be able to help you by discussing your options. Some options might be to:

    • Refinance
    • Get a loan modification
    • Work out a repayment plan
    • Get forbearance
    • Short-sell your home
    • Rent back your home
    • Give your home back to your lender through a “deed-in-lieu of foreclosure”

    A HUD-approved housing counselor can help you figure out which available options are best for you. Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through HUD's Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    If I file a complaint with CFPB, will that help escalate my claim with National Mortgage Settlement Process?

    Filing a complaint with the CFPB will not escalate a claim with the National Mortgage Servicing Settlement. Visit http://www.nationalmortgagesettlement.com/ for more information regarding borrower assistance.

    If I have been affected by a natural disaster, what should I do in the days immediately following it?

    The checklist below will help guide you through some of the financial decisions you will need to make as soon as possible following a natural disaster:

    • If your home, car or property was damaged by the storm, contact your insurance company to start the claims process.
    • Ask for a copy of your insurance policy if you don’t have one available. It will help you verify your coverage.
    • Damage to your home does not stop your responsibility to pay your mortgage. So you should contact your mortgage servicer and tell them about your situation.
    • If you don’t have a monthly mortgage statement or coupon book with you, search the Mortgage Electronic Registration Systems (MERS) or call them toll-free at (888) 679-6377 to find the company that services your mortgage.
    • Take a look at your income and savings and determine how much money you have available to pay bills and creditors.
    • If your income is interrupted and you don’t think you will be able to pay your credit cards or other loans, be sure to contact your lenders as soon as possible. Explain your situation and when you think you will be able to resume normal payments. The important thing is to make the calls before your next payments are due.
    • If you are in a presidentially declared disaster area, you may qualify for disaster assistance. Check with the Federal Emergency Management Agency (FEMA) for more information.
    • If your home is damaged to the point that you can’t live in it, contact your utility companies and ask to suspend your service. This could help free up money in your budget for other expenses.
    • Take a look at your bills and set priorities. Your mortgage, rent, and insurance payments should stay high on your list.

    If I have been affected by a natural disaster, what should I do in the weeks following it, as I rebuild?

    The checklist below will help guide you through some of the financial decisions you will need to make as you rebuild following a natural disaster:

    • Be careful if you choose to hire a public adjuster to help with your insurance claim. Be sure the adjuster is licensed to do business in your state. Also watch out for these red flags:
      • Big upfront fees. Don’t pay a lot before you know if the adjuster is going to help you.  Many states put a limit on fees.
      • References to contractors who can help. Dishonest adjusters will sometimes work with contractors that give them kickbacks.
      • False or inflated claims. This is fraud against the insurance company.
      • Asks for a suspicious amount of personal information. Some con artists may pose as adjusters to steal your personal information.
    • Get bids from several local, established contractors. And avoid contractors who:
      • Are working door to door
      • Come from out of state
      • Don’t provide an address and phone number, or refuse to show identification
    • Ask if the contractor has the required licenses, and get license numbers.
    • Check with your state licensing agency’s website or hotline to make sure the licenses are valid.
    • Ask the licensing agencies if the contractor has a history of complaints.

    If I have problems with my credit history, can I still get a mortgage?

    Lenders look at a variety of factors when evaluating a mortgage loan application. If you have weaknesses in your credit history, you may qualify for a U.S. Federal Housing Administration (FHA) loan. You may also qualify for a subprime mortgage, but note that subprime mortgages may have much higher interest rates than most other mortgages. Subprime loans may have other features that influence your rate, such as the possibility that your rate will rise steeply during its lifetime.

    If you have a bad credit history or a low credit score, you might consider delaying a home purchase and taking some time to rebuild your credit history and credit score. A housing counselor or programs offered by state and local governments and non-profit organizations can help identify ways for you to improve your credit history. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    TIP: Be proactive in dealing with credit. If you are having trouble paying creditors on time, the sooner you talk to your creditors the more likely it is you can work something out with them, such as a temporary payment plan.

    If you need help, look locally for a credit counselor but check to make sure they are trustworthy. If you are having trouble with your mortgage, call the CFPB Consumer Hotline at 1-855-411-CFPB (2372) and ask to be connected to the HOPETM Hotline. If you start to get debt collection mail or calls from someone you’ve never heard of, it could be that one of your debts was sold to a debt collector, or it could be a case of identity theft. Ignoring the problem usually makes it worse. Ask the creditor in writing for verification of the alleged debt to be mailed to you so you can determine whether it is a debt you owe.

    If I lose my home to foreclosure, can I ever buy a home again? What impact will a foreclosure have on my credit report?

    It is possible to qualify for a mortgage after a foreclosure. However, foreclosure will hurt your credit.

    Foreclosure information generally remains in your credit report for seven years from the date of the foreclosure. Even if you have a bad credit history or a low credit score, you may qualify for an Federal Housing Administration (FHA) loan. You may also qualify for a subprime mortgage, but note that subprime mortgages may have much higher interest rates than most other mortgages. Carefully consider the costs and risks of the loan that you are offered, and weigh the costs of the loan you might be able to get now against the option to wait and build up your credit history before buying a home.

    If I need to have a co-signer, can a lender or broker require that it be my spouse?

    No. If you do not individually qualify, the creditor such as a lender or broker may request a co-signer, guarantor, endorser, or similar party. Your spouse may function as this additional party. But a lender or broker cannot require that it be your spouse.

    If I take out a Home Equity Line of Credit/HELOC, how much can I borrow?

    When you take out a Home Equity Line of Credit, the creditor will establish a credit limit, which is the maximum amount you can borrow using the HELOC. The amount of your credit limit depends on several factors, including how much equity you have in your home.

    If I take out a reverse mortgage loan, does the bank own my home?

    No. When you take out a reverse mortgage loan, the title to your home remains with you. You must continue to pay for repairs, property insurance, and taxes.

    When your move out, sell the home, or the last surviving borrower dies, you or your estate will need to repay the loan, typically by selling your house. The loan balance will include the amount you received in cash, plus the interest and fees that have been added to the loan balance each month. You or your heirs will pay off the loan using the proceeds from the sale, and keep the difference, if any.

    Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. With an FHA-insured HECM loan, if the loan balance is more than your home is worth, you don’t have to pay the excess. You or your estate will typically sell the home, the lender will take the proceeds from the sale as payment on the loan, and the FHA insurance will cover any remaining loan balance.

    If your heirs would like to keep the home, they will have to pay off the loan with cash or a new mortgage. If the loan balance is more than the house is worth, they will only have to pay 95% of the value of your home in order to pay off the loan, and the FHA insurance will cover the remaining loan balance. 

    If you are considering a proprietary (non-FHA-insured) reverse mortgage, make sure you understand what will happen if the loan balance is worth more than your home when you die or want to move.

    If something related to my loan changes, when does the lender have to tell me?

    Your lender may be required to provide you with a new Good Faith Estimate (GFE) and a new Truth-in-Lending statement if the information disclosed on the forms changes. Once you have been provided a GFE and a Truth-in-Lending disclosure after you first apply, your estimated settlement charges and loan terms can only change within specific regulatory requirements.

    If there are changes affecting information disclosed on the GFE, in some cases your lender must send you a revised version within three business days of the lender’s receipt of information justifying the change. If there are changes to information disclosed by the Truth-in-Lending statement, your lender may be required to issue a corrected Truth-in-Lending statement so that you receive it at least three business days before closing.

    I’m a servicemember or veteran and am considering buying a home. What do I need to take into account?

    The first step is to be sure that you can afford to buy a home and in what price range. If you are on active duty, make an appointment to see a financial counselor at your local installation’s Personal Financial Management Program (PFMP). Find your nearest PFMP office online – select “Personal Financial Management Services” in the “Program or Service” drop-down box. Additional resources that can help you make this complex decision are the U.S. Department of Defense-endorsed sites Military One Source and Military Home Front, and the U.S. Department of Housing and Urban Development (HUD).

    When calculating how much you can afford, don’t forget to consider future changes in your income or obligations that might be triggered by children, retirement or transition from the military, or a change in your spouse’s employment status. You should also take into account potential fluctuations in home values and interest rates, especially if you expect to move or are considering an adjustable rate mortgage (ARM). Also, keep in mind that the cost of homeownership includes payments for homeowner’s insurance, property taxes, utilities, and maintenance, and repairs that you may not have faced when living in on-base or leased housing.

    Be sure to check your credit report and credit score information to ensure that an error doesn’t deprive you of the best interest rate that you could qualify for on a mortgage. Although a difference of one percent on a mortgage rate may not seem like much, it can add up to thousands of dollars in the long term.

    As a servicemember, you may be able to access not just your credit report but also your credit score for free, along with free financial education and counseling, through the PFMP office. If you are deployed, your first resource is your chain-of-command, who should be able to direct you to the servicing Personal Financial Manager (PFM) in your situation.

    In isolated cases where you are not provided access to a PFM, your credit report and score may be obtained by contacting the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation by emailing creditscore@finra.org. Be wary of credit repair scams that promise to improve your credit score for a fee. Consult your PFMP counselor or the free FINRA program instead.

    Changes in the real estate market are hard to predict, so think carefully about purchasing a home if you expect to be in the area for only three to five years or less. A downturn in the real estate market may make it hard for you to sell, rent or even refinance the home if you are obligated to move away.

    I’m in the military (active, Guard, Reserve) or a veteran and I’m considering buying a home. How do I know if I’m eligible for a VA-guaranteed loan?

    The VA has the answer. The VA can help you determine your home loan benefit and issue your Certificate of Eligibility (COE). Visit theVA’s websitefor detailed information about eligibility. In addition, many veterans and current servicemembers canaccess their eligibility certification online. Registration is free, immediate and provides information on many benefits for servicemembers, veterans, and their families.

    You can also obtain a hard copy of your COE through the mail by sending VA Form 26-1880, “Request for a Certificate of Eligibility,” to Atlanta Regional Loan Center, ATTN; COE (262); P.O. Box 100034, Decatur, GA 20031, or you may call the VA Home Loan Assistance number at 1-888-244-6711.

    I’m not yet behind on my mortgage loan payments, but worry that I will be. What should I do?

    There are steps you can take:

    • Call your servicer. Depending on your situation, your servicer may be able to modify the terms of your loan or provide other forms of relief.
    • Talk to a HUD-approved housing counselor. A U.S. Department of Housing and Urban Development (HUD)-approved housing counselor is a good resource for identifying the range of programs and other help that you qualify for and can help you evaluate ways to address your mortgage loan problems. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    Is my broker being paid for getting me a mortgage loan?

    Brokers are usually paid a loan-specific fee for their services. Some brokers are paid by salary, but most also receive commissions for their work. This commission could be paid directly by you or by the lender with whom the broker works.

    Is there a limit on how much the lender can make me pay each month for insurance and taxes (the escrow?)

    There is a limit on how much the lender can make you pay each month into escrow. Servicers may not require you to pay more than one sixth of the estimated total annual payments out of the escrow account (for items such as taxes and insurance) in advance (a two-month “cushion”). On top of that cushion, you have to pay every month one twelfth of the total annual escrow payments the servicer reasonably anticipates paying out of the escrow account.

    Is there any reason my mortgage payment would change over the life of my loan?

    Yes. One reason may be that you have an adjustable rate loan. In this type of loan, the payments can go up or down, based on the terms of the agreement that you signed.

    Some people have interest-only loans or pay option loans. With these loans, the borrower can postpone making principal payments for a while. Eventually, though, the borrower has to start paying principal and that will make the monthly payments go up.

    Even if you have a fixed rate loan, your payments may change if you are paying your taxes and insurance through an escrow account maintained by your servicer. If there is a change in your property taxes, the escrow portion of your monthly payment may go up. An increase in your homeowner’s insurance rates also will increase your escrow payment.

    If you have mortgage insurance, your payments may change once you are able to and do in fact cancel the insurance.

    Is there any way I can check to see if the company or person I contact is permitted to make or broker mortgage loans?

    The Nationwide Mortgage Licensing System & Registry (NMLS) maintains a database of licensed brokers. Additionally, you can usually check if a broker is licensed or if there has been an order of disciplinary action against the broker by checking with your state regulator.

    Is there any way I can see copies of the documents I will be signing at the closing beforehand?

    You can call your lender prior to closing and request copies of the documents you will be signing.

    Is there any way I can see if there have been disciplinary actions against my broker?

    You can usually check if there has been an order of disciplinary action against a broker by checking with the appropriate state regulator.

    Is there somewhere I can talk to someone in-person? Is there somewhere local that can help me?

    The U.S. Department of Housing and Urban Development (HUD) has approved housing counselors that may be available to meet and talk with you. To find a HUD-approved housing counselor today, call the CFPB at 1-855-411-CFPB (2372).

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    Is there such a thing as a no-cost or no-closing loan or refinancing?

    Yes, some lenders or mortgage brokers may offer you a loan that is advertised as having no lender fees or no closing costs. There are two ways lenders can do this. One way is by charging you a higher interest rate to cover the cost of making the loan. The other way is by adding the closing costs to your loan amount. Both methods involve no cash to close the loan but result in a higher monthly payment.

    I’ve been contacted by a mortgage relief company. Is there anything that these companies have to tell me?

    These companies must disclose that:

    • They are not associated with the government, and their services have not been approved by the government or your lender
    • Your lender may not agree to change the terms of your loan
    • You could lose your home and damage your credit rating if the company tells you to stop paying your mortgage

    These companies must also explain in their communications to you that you can stop doing business with them at any time, can accept or reject any offer they obtain from the lender or servicer, and, if you reject the offer, you don’t have to pay the company’s fee. These companies must also disclose the amount of their fees.

    Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through U.S. Department of Urban Housing and Development (HUD)’s  Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today or to submit a complaint with us. You can also submit a complaint online.

    If you think you may have been a victim of a mortgage relief scam, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    I’ve heard about something called the HOPE™ Hotline. What’s that?

    The HOPE™ Hotline offers personalized advice from housing counseling agencies approved by the U.S. Department of Housing and Urban Development (HUD). You can access this national hotline by calling 888-995-HOPE (4673) 24 hours a day, 7 days a week. You may also access the Homeownership Preservation Foundation website.

    My broker or lender told me I could get a better mortgage if I added certain untruthful information to my loan application. What should I do?

    Do not submit information that you know is not true on your loan application and do not use a lender or broker who suggests you do so. There can be legal consequences for doing so. If a lender or broker advises you to do this, file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    If you have already listed untruthful information on your loan application, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    My contractor told me I had to get a HECM reverse mortgage for his company to perform repairs on my home. Is this true?

    No. You are not required to take out a reverse mortgage as a condition for a contractor to make repairs on your home.

    If you need help paying your property taxes or are looking to make a home repair or home improvement, you may qualify for a low-cost, single-purpose loan in your area or other assistance. Area Agencies on Aging (AAAs) generally know about these programs. To find the nearest agency, visit their website or call 1-800-677-1116. Ask about “loan or grant programs for home repairs or improvements,” or “property tax deferral” or “property tax postponement” programs, and how to apply.

    You can also call your local county tax assessor and ask about senior “circuit breaker” programs, which are government-funded programs that may provide a direct cash grant or tax credit to help people over 65 to pay property taxes, mobile home taxes, rent or nursing home charges.

    My current mortgage loan is more than I can pay. What can I do?

    You may be able to refinance your mortgage loan or get a loan modification. Both of these options result in you having different loan terms and may involve additional fees. This could change the amount you pay each month or the length of your mortgage loan. A federal program called The Home Affordable Modification Program (HAMP) was created to provide loan modifications to eligible struggling homeowners.

    Many mortgage loan companies also offer other types of modifications to eligible borrowers. If the value of your home has fallen, the federal government’s Home Affordable Refinance Program (HARP) or the FHA Short Refinance Program may provide you with additional refinancing options. To learn more, call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    My financial situation is going to improve soon. Can I get temporary help with my mortgage loan?

    If you have recently lost your job, your income is temporarily reduced, or your monthly expenses have temporarily gone up, your servicer may grant you a short-term reduction or suspension of your mortgage loan payments. You should make sure this is the right option for you. Don’t sign anything until you’re sure you understand it. Foreclosure prevention counseling is available free of charge through the U.S. Department of Housing and Urban Development (HUD)'s Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    My GFE has an interest rate lock time period. Does this mean the interest rate is locked in?

    The rate lock period listed on the “Important Dates” section of your GFE tells you how long you have, after you lock your interest rate, to go to settlement. If you do not go to settlement on your loan by that time, your interest rate may change or you may be charged a fee to extend the lock period.

    Just because this section is on the GFE does not mean that your interest rate is locked. However, if item number four reads “You must lock the interest rate at least ‘N/A’ days before settlement,” then your rate is locked.

    To lock your interest rate, you must also sign a rate lock agreement. Sometimes the lender may voluntarily offer to lock the interest rate for you. But to guarantee that your interest rate is locked you must sign a rate lock agreement. By obtaining a rate lock agreement, either at the time of application or while your lender is processing your loan, you keep your interest rate and points from changing until the rate lock period expires.

    My home was damaged or destroyed in a natural disaster. Can I get a forbearance?

    Depending upon the type of loan you have, your lender may be willing to temporarily reduce or suspend your payments. To learn more, call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    My lender offered me a home equity line of credit (HELOC). What is a HELOC?

    A home equity line of credit (HELOC) is an “open-end” line of credit that allows you to borrow repeatedly against your home equity. You “draw” on the line over time, usually up to some credit limit, using special checks or a credit card. As you repay the principal, you can draw that amount again. This part of the plan is known as the “draw period,” which usually lasts for some fixed term, such as ten years. After the draw period ends, you typically then enter the “repayment period,” during which you must pay off the outstanding balance in regular periodic payments of principal and interest. The repayment period is also a fixed term of years.

    Depending upon your lender and your HELOC agreement, you may have to pay back the whole amount you borrowed as soon as the repayment period begins. HELOCs usually have a variable interest rate that changes over time, so your payments may not be the same from month to month.

    If the value of your home decreases significantly, your lender may decide not to allow you to take out additional credit under your HELOC plan, which may result in you not having access to as much money as you thought you would. The lender may also freeze your ability to take out additional funds if your financial circumstances change and your lender does not believe you will be able to make your payments.

    Tip: If you are considering a home equity line of credit, shop around to compare all your options. Just like other mortgages, HELOCs have costs and fees associated with them. Also, be sure you review the risks of this type of credit. If you do not understand the terms and conditions for your loan, ask your lender, broker, trusted financial advisor or housing counselor. The best way to avoid problems is not to sign anything you don’t understand.

    Tip: If you are having trouble with your bills, taking out a HELOC to pay down your debt may cause more trouble for you and put your home at risk. Before taking out a HELOC to consolidate your debts, talk to a U.S. Department of Housing and Urban Development-approved housing counselor.

    A HUD-approved housing counselor can:

    • Advise you on managing your money and debts
    • Help you develop a budget
    • Give you free educational materials or workshops

    Avoid firms that ask for big fees up-front or that make unrealistic promises – like restoring your credit or repaying your debts for pennies on the dollar. You can check whether a housing counselor is HUD-approved or find a HUD-approved housing counselor by visiting HUD’s website or by calling HUD’s housing counselor referral line (1-800-569-4287).

    My lender or broker never provided me with the right to rescind notice. What can I do?

    If you never receive the Truth-in-Lending disclosure or the Notice of Rescission from the creditor and you were entitled to one, you can cancel at any time during the first three years after you sign the credit contract, or before you sell your home – whichever occurs first. Report any company or individual that does by filing a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    My lender or broker said that my spouse had to co-sign my mortgage loan. Is this right?

    In general, a creditor such as a lender or broker cannot require your spouse’s (or another person’s) signature for individual credit if you qualify on your own for the amount and terms requested. If you are applying for joint credit, however, a lender or broker may require your spouse’s signature (or the signature of the person with whom you are applying).

    If you apply for a mortgage or home equity loan, a lender or broker may require your spouse’s (or other person’s) signature on any instrument necessary to make the property being offered as security available to satisfy the debt if you were to fail to repay. For example, a lender or broker may require your spouse (or other person) to sign an instrument to create a valid lien or pass clear title.

    My lender or servicer advised me to stop making payments on my mortgage loan so I could qualify for a loan modification. What can I do?

    You should not trust anyone giving you this advice. Report companies giving you this advice by file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    If you are having trouble making your mortgage loan payments, call the CFPB Consumer Hotline at 1-855-411-CFPB (2372) to be connected with a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can help you explore your options.

    My lender (servicer) said I could go on a repayment plan. What does that mean?

    If your lender or servicer puts you on a repayment plan, you may be able to make up your missed mortgage loan payments over an extended period of time. You should make sure this is the right option for you. Don’t sign anything until you’re sure you understand it. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    My servicer has not responded to the Qualified Written Request I sent. What can I do?

    If it has been more than 20 business days since you sent the QWR and you have received no communication from your servicer, or you received an initial acknowledgement of your request but it has been more than 60 business days and you received no additional communications, you can file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    My servicer offered me a shared appreciation mortgage as a means of modification. What does that mean?

    Under a shared appreciation mortgage, you agree to give your lender a share of any increase in the value of your home. Depending on how your home value changes over time, the lender’s share of the value of your home might be worth more than the balance you owe on the loan. Because you give up part of your future gains, the interest rate and monthly payments on your loan will typically be lower than the market rate for other types of loans. The lender will collect its part of the increase in your home value when the loan is repaid.

    My servicer refuses to accept my payment. What can I do?

    You can send a Qualified Written Request (QWR) requesting an explanation. Be sure you have followed the instructions for submitting your mortgage payment. If you are current on your loan, and yet the servicer refuses to accept your payment, then you can also file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    If you’ve gotten behind, servicers are not generally required to accept payments that do not equal at least one monthly payment, but you can call the servicer, explain that you’re trying to get current, and ask if they will accept your payments or work with you on a repayment plan or loan modification. You can also call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can help you understand your options.

    If your payment issues can lead to imminent foreclosure or you have been served legal papers, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    My servicer says I never submitted my payment but I did. What can I do?

    You can send a Qualified Written Request (QWR) explaining the issue. If you are current on your loan and your servicer still refuses to accept your payment, you can file a complaint with the CFPB online or by calling (855) 411 CFPB (2372). We'll connect you to a Department of Housing and Urban Development (HUD)-approved housing counselor.

    If your payment issues can lead to imminent foreclosure or you have been served legal papers, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    Should I use a reverse mortgage to consolidate my debts?

    Talk to a HUD-approved reverse mortgage counselor before consolidating your debts with a reverse mortgage.  You should also talk to a qualified credit counselor to help you weigh your options.

    A qualified credit counselor can:

    • Advise you on managing your money and debts.
    • Help you develop a budget.
    • Give you free educational materials or workshops.
    • Discuss the risks of consolidating unsecured debts (credit cards, etc) into a loan backed by your home.

    Avoid people and businesses who claim that they will help you lower your debts but ask for big fees upfront or make unrealistic promises – like restoring your credit or repaying your debts for pennies on the dollar. 

    Someone offered to write a Qualified Written Request to my servicer for a fee. Can I do this for free?

    You do not have to pay anyone to write a QWR to your servicer; you can do this yourself. You can use this sample QWR letter to make the request yourself.  

    Remember to:

    • Make sure that your QWR is sent to the address that the servicer uses for receiving QWRs
    • Send the QWR separate from your mortgage payment
    • Send the QWR certified mail, return receipt requested so you will have confirmation that your QWR arrived
    • Continue to make your scheduled mortgage payments

    The seller told me I have to purchase title insurance from a particular company or they won’t sell me the house. Can they do this?

    No. Under the Real Estate Settlement Procedures Act (RESPA), a seller may not require, directly or indirectly, a borrower to purchase title insurance from any particular company as a condition of the sale of a home.

    What are adjusted origination charges?

    Adjusted origination charges are found on page two, Line A, of your Good Faith Estimate (GFE) (and Line 803 of your settlement statement). Adjusted origination charges are your origination charges (from Block 1 on page two of the GFE) offset by any credits or points (from Block 2).

    What are closing costs?

    Generally, closing costs are fees and costs associated with obtaining the mortgage loan. You pay most of these expenses when signing the final loan documents, or when you “close” the deal. Some common closing costs include:

    • Underwriting and/or processing fees
    • Appraisal fees
    • Pest inspection fees
    • Title insurance
    • Title inspection and recording fees

    Your lender is required to provide you with disclosures about these and other costs after application and again at closing. You may request a statement of these closing costs the day before closing.

    TIP: You can save money by shopping for providers of some of the services required by the lender or by negotiating with your lender. You can use the phone book, word of mouth, or the Internet to find service providers. You can obtain multiple estimates for these service providers to compare with estimates quoted by the lender. For example, you may be able to save a substantial amount of money by shopping for title insurance providers.

    What are daily interest charges?

    Daily interest charges show the charge due at settlement for any daily interest that will accrue on your loan for the period between the date of settlement and the first day of the period covered by the first scheduled mortgage payment. (Note that this may not be the first day of the month.) This amount will be listed in Box 10 of your Good Faith Estimate (GFE) (and on Line 901 of your settlement statement) and may change between your GFE and closing.

    What are discount points or points?

    One “point” equals one percent of the loan amount. For example, on a $100,000 loan, each point costs you $1,000. What is commonly referred to as a “discount point” in the mortgage industry is a point you pay the lender or broker to reduce the interest rate on a loan. In general, the more discount points you pay, the lower the rate. Other fees that do not lower your interest rate may also take the form of points, so be sure to clarify the type of point you are paying.

    TIP: You can ask your broker or lender to tell you the dollar amount you will pay in points. If you don’t understand the reason you are paying points for your loan, ask your housing counselor, trusted financial advisor, lender or broker. The best way to avoid problems is not to sign anything you don’t understand.

    TIP: Points may be tax deductible. For more information on how to deduct points from your taxes, visit the Internal Revenue Service’s website.

    TIP: Determine if paying points makes sense for your situation. How long do you plan to stay in the home? The longer you plan on living in your home, the more sense it may make to pay points. On the other hand, if you’re not sure you will stay in your home for more than a few years, paying points may make less financial sense.

    Consult with your lender, trusted financial advisor or housing counselor to determine if paying points benefits your long-term goals.

    What are government recording charges?

    Government recording charges are fees assessed by state and local government agencies for legally recording your deed, mortgage and documents related to your loan. Either a borrower or a seller may pay these fees. These charges are listed in Block 7 of your Good Faith Estimate (GFE) (and Lines 1201-1205 of your settlement statement). The total of these charges and certain other settlement services generally cannot increase by more than 10 percent at closing.

    What are mortgage loan modification scams?

    Mortgage loan modification scams are schemes to take your money – often by making a false promise of saving you from foreclosure. Scammers may:

    • Ask you to pay high fees upfront to receive services
    • Promise to get you a loan modification
    • Ask you to sign over title to your property
    • Ask you to sign papers that you do not understand
    • Say you should start making payments to someone other than your servicer or lender
    • Tell you to stop making mortgage loan payments altogether

    If anyone has given you this type of advice, report that company by file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372). You can also get real help by calling the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    If you think you may have been a victim of a mortgage loan modification scam, you may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What are origination services? What is an origination fee?

    An origination fee is what the lender and any mortgage broker charges the borrower for making the mortgage loan. Origination services include taking and processing your loan application, underwriting and funding the loan, and other administrative services. Origination charges are listed in Block 1 on your Good Faith Estimate (GFE) (and Line 801 of your settlement statement), and generally cannot increase at settlement of your mortgage loan.

    What are some of the financial considerations when thinking about buying or renting a home?

    Buying a home might make sense if:

    • You have a steady source of income and a good record of paying your bills on time. Lenders will look at your ability to repay the mortgage and how positive your credit history is when deciding if you qualify for a loan.
    • Home prices where you are looking are stable. One risk of buying a home is that its value could go down. If that happens, you could even end up owing more on your home loan than the property is worth.
    • You are able to pay for property taxes, homeowner’s insurance, and water, and other utilities.
    • You’re willing to stay put for a few years. Buying and selling a home are expensive processes involving lots of fees and commissions. You’ll want to stay in the home long enough to make these costs worth it, and if home prices aren’t stable or are declining, that could take several years.
    • You can cover the cost of repairs and maintenance. When you own the home, you’re responsible for maintenance and repairs – from small ones like a leaky faucet to major ones like replacing a roof. Be sure to build an emergency fund to cover unexpected expenses.
    • The potential tax advantages make sense given your financial situation.Consult your financial or tax advisor to determine whether there are tax advantages to buying instead of renting.

    What are the costs I will have to pay for a reverse mortgage?

    A reverse mortgage has substantial upfront fees and charges that are generally higher than for other home loans. These costs can vary based upon type of reverse mortgage and your lender.

    Many borrowers choose to pay for these upfront costs using their loan proceeds, rather than paying them out of pocket.  If you do so, you will be charged interest on these costs in addition being charged interest on to the money you receive. Typically, you will owe interest, reverse mortgage insurance premiums, loan origination fees, and closing costs. Before you take out the loan, you should consider how much money you will receive after the fees are taken out.

    Each month, interest and mortgage insurance premiums are added to your loan balance. Over time, the amount you pay in interest and mortgage insurance compounds the same way a balance on a credit card does. Each month, the interest and mortgage insurance are calculated based on the current loan balance – which includes prior months’ interest and mortgage insurance. As your loan balance grows, so does the amount of the interest and mortgage insurance charged that month.

    What are title service fees?

    Fees for title services include charges for all services involved in connection with the provision of title insurance and the services of a title, settlement or escrow agent to conduct your settlement. The total of fees for title services and the premium charged for the lender’s title insurance policy is listed in Block 4 of your GFE (and Line 1101 of your settlement statement). The totals for title service fees, the premium for lender’s title insurance, and certain other settlement services generally cannot increase by more than 10 percent at the closing if you use the providers listed by your lender.

    What can I do if I can’t afford to stay in my home?

    Even if you can’t afford to stay in your home, you may still have options to avoid foreclosure, which could remain on your credit history for up to seven years and may be more damaging to your credit history than other outcomes.

    Your other options may include renting back your home, a short sale or a “deed in lieu of foreclosure.” Foreclosure prevention counseling is available free of charge through U.S. Department of Housing and Urban Development (HUD)’s Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What costs will I have to pay as part of taking out a mortgage loan?

    First, your loan will include charges paid to your lender or broker for providing the loan. These charges may come in the form of points and fees. You may have an option to pay a higher interest rate on the loan rather than paying points and fees upfront. If a fee is charged for the lender and broker providing the loan, that fee may include amounts for taking the application, processing and underwriting the loan, and the loan commitment. You may also be charged for locking your rate.

    Often, borrowers have an opportunity to pay discount points at closing to reduce their interest rate.  Other times, borrowers agree to pay a higher interest rate to reduce their costs at closing. Before paying discount points for a lower interest rate or agreeing to a higher one, you should consider talking to a trusted financial advisor other than your lender, such as a HUD-approved housing counselor.

    Finally, you will pay for the cost of items required by your lender in order to make the loan. Examples of these are real estate appraisals, closing fees for an attorney or settlement agent, title insurance, and government recording fees and transfer taxes.

    What do I do if the terms of the loan are not what I was promised?

    You do not have to sign anything at closing unless you are satisfied with the terms. If you are borrowing money to buy a home, you likely have a contract with the seller. That contract may limit the amount of time you have to purchase the home and also subject you to legal action if you break the promises you made in it to the seller. However if there are loan terms that are different from what you expected, you should ask for an explanation.

    Before signing, make sure the settlement agent, lender or broker has a permissible reason to change the loan terms and only sign if you are sure you can pay the higher payments on the loan. Do not sign any papers you do not understand. Review your contract or seek the advice of an attorney to determine what options you have if you decide to walk away from a particular loan offer.

    If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website. You can also file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    What documents will my lender or mortgage broker request after I have found the right loan for me?

    The documents a lender or mortgage broker may require will vary. Your lender or mortgage broker should give you a specific list of what it will need. In general, most request the following:

    • A purchase contract, if you have one for the home you are buying
    • Social Security numbers or individual taxpayer identification numbers for all borrowers
    • Your home addresses for at least the past two years
    • Current names, account numbers, and balances of all checking, savings, money market, retirement, and credit card accounts
    • The address of your bank branch
    • Checking and savings account statements for the past two to three months
    • Your most recent pay stubs, W-2s, or other proof of employment and income verification
    • Federal income tax returns for the past two years
    • Evidence of any other income you receive (child support orders, Social Security award letters)
    • Balance sheets and tax returns if you are self-employed
    • Divorce settlement papers if applicable
    • Canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt
    • Information on other consumer debts, such as credit cards, car loans, furniture loans, student loans, and department store credit cards
    • Gift letters, if you are using gifts from parents, relatives or organizations to help cover the down payment or closing costs; gift letters state that the money you received is a gift and will not have to be repaid

    TIP: A lender or mortgage broker is not permitted to require you to provide any documents to verify your application information as a condition of providing you a Good Faith Estimate. A lender may, however, ask for this information. Lenders and mortgage brokers cannot charge you any fees, except a credit report fee, before you receive a GFE and indicate your intent to proceed with the loan.

    What does it mean to apply for a loan or fill out a loan application?

    A loan application means that you have given a lender or a mortgage broker certain information in anticipation of a credit decision. Information you give might include your name, a property address,desiredloan amount, social security number (to obtain a credit report), estimate of the property value, and your monthly income. Within three business days receiving the information needed for your application the lender or mortgage broker must provide you with a Good Faith Estimate, which you can use to compare the loan quote to loan quotes from other lenders and mortgage brokers.

    What does it mean to be preapproved for a mortgage loan?

    To be preapproved for a mortgage loan means that a lender has evaluated your creditworthiness and has made a commitment to extend you a loan up to a specified amount. The preapproval will say how long it is valid for and may contain some other conditions for you to get the loan. But in general, a preapproval means that the lender is ready to make you a particular mortgage loan based on the information you provided at the time of your preapproval.

    What does it mean to be prequalified for a mortgage?

    Prequalification is a lender’s estimate of how much you could be eligible to borrow. You may be asked to supply information about your income, savings, assets, and debt. The lender will review this information and decide how much you might be able to borrow.

    Prequalification does not mean you will get the loan. But consider making a prequalification request to help you decide on a price range for your new home. Prequalifications are usually free.

    Tip: Just because you prequalify for a certain size or type of loan doesn’t mean it is a good choice for you. It’s up to you to make sure your home loan makes sense for you. The lender will look at your income and other obligations to determine how much it is willing to lend you. You’ll need to review your income, expenses, and savings goals to make sure you can afford the loan and are comfortable with the monthly payments. If you are considering a loan in which the monthly payments could go up, you also need to think about how an increase in the monthly payment will fit in with your budget.

    What fees can my lender charge if I take out a HELOC?

    Before you take out a Home Equity Line of Credit be sure to read the documents carefully to see what fees your lender can charge you. Under some plans, lenders can charge you:

    • For not using your HELOC (an inactivity fee)
    • For each year you have the HELOC (an annual or membership fee)
    • For terminating the HELOC early, usually within the first two or three years after it is opened (a cancellation fee)

    What happens after I apply for a loan?

    Unless the lender denies your application, you should look for these four important documents either at or shortly after application:

    • Good Faith Estimate (GFE) disclosure. Generally, the lender is required to send to you the GFE within three business days after your application. It explains the basic loan terms and the costs you are likely to pay at the closing for the loan. If you decide to proceed with the loan, this form should give you a reliable estimate of most of the costs involved.
    • Truth-In-Lending disclosure. Generally, the lender is required to send you an initial Truth-In-Lending disclosure statement no later than three business days after your application. It will include the following information:

    o   Your annual percentage rate (APR)

    o   Your finance charge

    o   The amount financed (the amount of credit provided on your behalf)

    o   The total of payments (the amount you will have paid after you have made all of your scheduled mortgage payments)

    • Mortgage Servicing Disclosure. For many mortgage loans, the lender must provide you with the Mortgage Servicing Disclosure at the time your mortgage application is submitted or send it within three business days. This statement will tell you whether the lender may sell the servicing rights of its loans. If the servicing rights are sold, you will be dealing with a different servicer once you begin making payments on your loan.
    • Settlement Cost booklet. The booklet will include information on the various stages of the home-buying process, home sale and purchase agreements, the Good Faith Estimate, required settlement services to close your loan, and the HUD-1 Settlement Statement that you will receive at closing.

    In some cases you may receive additional information that will allow you to shop for loans with different lenders to find the loan most appropriate to your needs:

    • If you are considering a loan with an adjustable rate, you should receive a booklet called the Consumer Handbook on Adjustable Rate Mortgages before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.
    • If you are considering a home equity line of credit, you should receive a booklet called What You Should Know About Home Equity Lines of Credit before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.

    The only fee a lender or mortgage broker can charge you before you receive the GFE and indicate intent to proceed with the loan is a fee for running your credit report.

    After you receive your Good Faith Estimate your lender will verify information in your application before it will make a decision to give you the loan. Your lender will likely ask you for documents to verify your financial situation, such as paystubs or copies of your recent income tax returns as well as other information.

    In addition, certain tasks related to the property may need to occur, such as a property appraisal. You may need to obtain homeowner’s insurance and possibly other property insurance, such as flood insurance.

    What happens if I have to move out of my home into a nursing home or assisted living and I have a reverse mortgage?

    All reverse mortgage loans become due and payable when the last surviving borrower permanently moves out of the home. Typically, a “permanent move” means that neither you nor any other co-borrower has lived in your home for one continuous year.

    Most people will need to sell their home in order to repay their reverse mortgage. If the loan balance is less than your home is worth when you sell the home, then the difference is yours to keep.

    Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. With an FHA-insured HECM loan, if the loan balance is more than your home is worth, you don’t have to pay the excess. After you sell the home, the lender will take the proceeds from the sale as payment on the loan, and the FHA insurance will cover any remaining loan balance.

    Proprietary (non-FHA insured) reverse mortgage loans may not have these features, so make sure you understand the provisions carefully if you are considering a proprietary loan.

    What happens if my mortgage is sold? Is my loan safe?

    If your loan is sold, then your lender must provide you with a loan ownership transfer notice. Just because your loan is sold does not mean that your servicing right is sold and that you will get a new servicer.

    If your loan is sold, then the new owner of your loan must notify you within 30 days of the effective date of transfer. The notice will disclose the name, address, and telephone number of the new owner (and, if different, the person who can resolve issues concerning your loan payments or any right to rescind the loan), the date of transfer, and whether the transfer of ownership is recorded in public records.

    What happens if my reverse mortgage loan balance grows larger than the value of my home?

    Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. An FHA-insured HECM loan is a non-recourse loan, meaning that when your home is sold to repay the loan, neither you nor your family will be required to pay more than what your home sells for.

    If your heirs want to keep the home and the loan balance is more than your home is worth, they only have to pay 95 percent of the current appraised value of your home, and the FHA insurance will cover the remaining loan balance.

    Proprietary (non-FHA insured) reverse mortgage loans may not have this feature for paying off the loan, so make sure you understand the provisions carefully if you are considering a proprietary loan.

    What happens if my servicer changes? What do I do?

    If the servicing rights for your loan are sold and you get a new servicer, your old and new servicers must notify you of the transfer of the servicing rights to your loan. The notice should disclose to you the date on which your old servicer will stop accepting payments and the date on which your new servicer will begin to accept payments. It should also disclose the new servicer’s name, customer inquiry address, telephone number for an employee or department of the new servicer, and the effective transfer date.

    If your loan servicer changes, carefully review your monthly mortgage statement to confirm that your payments are being accurately credited. Failure to send your payments to the right servicer after you receive notification that the servicing rights on your loan have been sold could result in your payments not being credited properly.

    Additionally, for 60 days beginning on the effective transfer date of the servicing rights from your previous servicer to your new servicer, your new servicer cannot charge you a late fee or treat the payment as late if you sent it to you previous servicer on time or within the applicable grace period.

    Generally, the entity that is selling the servicing rights must provide you with a notice not less than 15 days before the effective date of the transfer and your new servicer must deliver a transfer notice not more than 15 days after the effective transfer date. If the two notices are combined, then the combined notice must be delivered to the borrower not less than 15 days before the effective transfer date.

    TIP: Pay attention to the effective dates and be sure to account for additional time in transit if you mail your mortgage payments.

    TIP: If you have your mortgage payment automatically debited from your bank account and your servicer changes, be sure to update the information in your account.

    What happens to my reverse mortgage if my spouse dies?

    This will depend on whether you and your spouse are listed as co-owners on the property deed and as co-borrowers on the reverse mortgage loan. Reverse mortgage loans generally require that all property owners be listed as borrowers and that all borrowers meet the minimum age requirement. If you are a co-owner and co-borrower, you would be able to continue living in the home even if your spouse dies or moves out.

    However, if you are not a co-owner and co-borrower – for example, because you are not yet 62 years of age – you would not be able to keep the home unless you can repay the entire loan balance in full when your spouse dies or moves out.

    Talk to a lawyer if you are considering any change in the title or ownership of your home. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What happens when I call a housing counselor?

    The housing counselor will ask you for information about your mortgage loan, such as the amount you owe and the date of your last payment. This information is generally on your last mortgage loan statement. The housing counselor may also ask for information about your pay stubs, tax returns, recent bank statements, and other bills you pay each month, such as car loans and credit cards.

    What if I do not qualify for a loan modification programs or any other help?

    If your home is about to be foreclosed on, call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who will work with you to see if there are any options still available, as well as to provide you with guidance on your next steps. You may be able to rent back your home, do a short sale, or negotiate a “deed-in-lieu of foreclosure.”

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What if my lender quoted me one rate at application but raised it at closing?

    If you have a rate lock agreement that is in effect, then your interest rate cannot change. You will probably have to pay a fee to lock your rate and the rate lock agreement is usually separate from the Good Faith Estimate (GFE). Unless you have it in writing, your rate probably is not locked.

    You can find out if your rate is locked by reviewing the GFE. If you look in the “Important Dates” section of the GFE, you will find four numbered pieces of information. If item number four reads “You must lock the interest rate at least ‘N/A’ days before settlement,” then your rate is locked.  

    You should be aware that unless you have a rate lock your interest rate, some of your origination charges, and your monthly payment might change at any time. You can also file a complaint with the CFPB online or by calling 1-855-411-CFPB (2372).

    Tip: You do not have to sign anything unless you are satisfied with the terms. If the terms change from time you applied, you should ask for an explanation. Before signing, make sure the settlement agent, lender, or broker provides a permissible reason for the change in terms and only sign if you are sure you can pay the higher payments on the loan. Do not sign any papers you do not understand, and review your contract or seek the advice of an attorney to determine what options you have if you decide to walk away from a particular loan offer. 

    If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.


    What is a balloon loan?

    A balloon loan is any mortgage loan that requires a larger-than-usual payment at the end of the loan term. Generally, a balloon payment is more than one and a half or two times the loan’s average monthly payment, and often it can be tens of thousands of dollars. Most balloon loans require one large, lump sum payment that pays off your remaining balance at the end of the loan. If you decide on a balloon loan, you will need to determine if and how you can make the balloon payment when it comes due.

    TIP: Don't assume you’ll be able to sell your home or refinance your loan before you have to make a balloon payment. The value of your property could decline or your financial condition could change. If you can’t afford paying off a balloon payment when it comes due – for instance, out of your savings – consider another loan.

    What is a "closing"? What happens at the closing?

    The “closing,” also called “settlement,” is when all the parties sign the documents and you become legally obligated under the terms of the transaction. If you are purchasing a home with loan proceeds, the closing of your loan (the time when your loan becomes final and the funds are disbursed) and the closing of your home purchase (typically, when ownership of your home is transferred to you) may happen at the same time.

    Your closing may be conducted by your title insurance company, an escrow company, your lender, your attorney, the seller’s attorney, by mail or even on the internet. All the parties may sit around a table and sign all the documents at once, or the closing could take several weeks as the signatures of each party are collected separately. Regardless of who performs the settlement or where it occurs, there will be many important documents that you will need to sign.

    Before you sign, make sure you carefully read and understand all the documents. Do not sign the loan documents if the loan is different from what you expected, if you cannot make the payments, or if you do not understand the loan terms. Be sure to understand whether your payments can increase over time.

    What is a conforming loan?

    A conforming mortgage loan is one that satisfies the terms and conditions set forth by Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA).

    What is a construction loan?

    A construction loan is usually a short-term loan that provides funds to cover the cost of building or rehabilitating a home. In general, construction loans have higher interest rates than longer-term mortgage loans used to purchase homes. The money borrowed through a construction loan is typically provided in a series of advances as the construction progresses. Payments sometimes start on a construction loan six to 24 months after the loan is made.

    You can pay off the balance in a lump sum or you may be able to convert the loan to a conventional mortgage loan, though if your construction loan does not automatically convert you may have to reapply for a new loan. Your choices will depend on the lender and your credit history when you apply, so make sure to compare multiple loans, terms, and features.

    What is a conventional loan?

    A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs). Conventional loans can be conforming or non-conforming.

    What is a “deed-in-lieu of foreclosure?"

    A deed-in-lieu of foreclosure means that, in order to be released from your mortgage, you must transfer ownership of your home to your lender. If you choose this option, a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can help you plan your next steps.

    Borrowers who are considering a deed-in-lieu of foreclosure should also ask their lenders or servicers about help with their relocation expenses, either under the federal government’s Home Affordable Foreclosure Alternatives Program (HAMP) or other private programs that are sometimes called “cash-for-keys.”

    If you live in a state in which you are responsible for any deficiency between the value of your property and the amount you still owe on your mortgage loan, you will want to ask your lender to waive the deficiency. If the lender waives of the deficiency, get the waiver in writing and keep it. For help in exploring your options, call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    What is a final Truth-in-Lending disclosure?

    A Truth-in-Lending Disclosure Statement provides information about the costs of your credit. Your Truth-in-Lending form will include information about:

    • Your annual percentage rate (APR)
    • Your finance charge
    • The amount financed (the amount of credit provided on your behalf)
    • The total of payments (the amount you will have paid after you have made all of your scheduled mortgage payments)

    What is a Good Faith Estimate? What is a GFE?

    A Good Faith Estimate (GFE) is a form that provides you with basic information about the terms of a mortgage loan for which you have applied and estimated costs to you in acquiring the loan. The lender or the mortgage broker must provide you with a GFE within three business days of the receipt of your application or required information. You must receive the GFE and indicate that you intend to proceed with the loan before you are charged any fees except a credit report fee.

    If the lender denies your application within three business days, it does not have to provide you with a GFE. It does have to tell you within 30 days either why your application was denied or that you have 60 days to request the reason why it was denied.

    Receiving a GFE does not require you to take the loan. Providing a GFE also does not commit the lender to making the loan. Instead, the GFE provides you with basic information about the loan, which will help you compare offers, understand the real cost of the loan, and make an informed decision about your loan choice.

    What is a home equity loan?

    A home equity loan (sometimes called a HEL) allows you to borrow money using the equity in your home as collateral. Equity is the amount your property is currently worth, minus the amount of any other mortgage on your property. You receive the money from a home equity loan as a lump sum and usually have a fixed interest rate that will not change. If you cannot pay back the HEL, the lender could foreclose on your home. If you are considering taking out a HEL to pay off your debts, you should explore alternatives with a credit counselor that do not potentially put your home at the risk of a forced sale. Moreover, home equity loans may have upfront fees and costs, so be sure to compare more than just your monthly payment when shopping around. 

    TIP: Talk to a credit counselor before consolidating your debts with a home equity loan. Before taking out a home equity loan to consolidate your debts, talk to a qualified credit counselor to help you weigh your options.

    Look for a non-profit credit counseling organization that can:

    • Advise you on managing your money and debts
    • Help you develop a budget
    • Give you free educational materials or workshops

    Avoid firms that ask for big fees up-front or that make unrealistic promises – like restoring your credit or repaying your debts for pennies on the dollar.

    Start your search at the National Foundation for Credit Counseling’s website or by calling 800-388-2227. Once you’ve identified counselors near you, check with your local Better Business Bureau or state attorney general’s office to see if any of them has a history of complaints.

    TIP: Be careful about borrowing against your home as part of an investment strategy. There is no such thing as a “risk-free” or “guaranteed” investment. You should carefully consider all your options before you borrow against your home to invest. All investments can lose value and that could put your home at risk if you cannot repay the loan later on.

    What is a HUD-1?

    The HUD-1 Settlement Statement is a document that lists all charges and credits to the buyer and to the seller in a real estate settlement. In transactions that do not include a seller, such as a refinance loan, the settlement agent may use the shortened HUD-1A form.

    What is a jumbo loan?

    Each year Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA), set a maximum loan amount for conforming loans, along with other conditions. In general, these loan limits are $417,000, although they go as high as $625,500 in some high-cost parts of the continental United States and Puerto Rico, and higher still in Alaska, Hawaii, Guam, and the U.S. Virgin Islands. Mortgage loans that exceed these conforming loan amounts for Fannie Mae and Freddie Mac are called jumbo mortgages. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming loan.

    What is a loan-to-value ratio and how does it relate to my costs?

    Lenders use the loan-to-value ratio as a measure to compare the amount of your first mortgage with the appraised value of the property. The higher your down payment, the lower your loan-to-value ratio. Some lenders require borrowers to get private mortgage insurance where the loan amount is too close to the value of the home. If you have to get private mortgage insurance, it will increase your monthly costs.

    TIP: Be sure to compare the amounts, terms and costs of several loans, including the cost of mortgage insurance if it will be required.

    What is a mortgage loan modification?

    A mortgage loan modification is a change in your loan terms. The modification should be designed to reduce your monthly payment to an amount you can afford.

    Modifications come in different forms. Some extend the number of years you have to repay the loan. Others might reduce your interest rate or even reduce your principal to help you make your monthly payments.

    Tip: Carefully consider what kind of modification addresses your needs best. If you receive a loan modification and you still can’t make the payments, you may lose your home. If you’d like to learn more about your options, talk to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    If you are facing imminent foreclosure or have been served with legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What is a mortgage?

    A mortgage is an agreement between you and a lender that gives the lender the right to take your property if you fail to repay the money you’ve borrowed plus interest. Mortgage loans are used to buy a home or to borrow money against the value of a home you already own.

    TIP: Seven things to look for in a mortgage:

    • The size of the loan
    • The interest rate and any associated points
    • The closing costs of the loan, including the lender’s fees
    • The Annual Percentage Rate (APR)
    • The type of interest rate and whether it can change (is it fixed or adjustable?)
    • The loan term, or how long you have to repay the loan
    • Whether the loan has other risky features, such as a pre-payment penalty, a balloon clause, an interest-only feature, or negative amortization

    TIP: Focus on a mortgage that is affordable for you given your other priorities, not on how much you qualify for. Lenders will tell you how much you are qualified to borrow – that is, how much they are willing to lend you. Several online calculators will compare your income and debts and come up with similar answers. But how much you could borrow is very different from how much you can afford to repay without stretching your budget for other important items too thin. Lenders do not take into account all your family and financial circumstances. To know how much you can afford to repay, you’ll need to take a hard look at your family’s income, expenses and savings priorities to see what fits comfortably within your budget.

    TIP: Don’t forget other costs when coming up with your ideal payment. Costs such as homeowner’s insurance, property taxes, and private mortgage insurance are typically added to your monthly mortgage payment, so be sure to include these costs when calculating how much you can afford. You can get estimates from your local tax assessor, insurance agent and lender. Knowing how much you can comfortably pay each month will also help you estimate a reasonable price range for your new home.

    What is a no-cash loan?

    This is another term that is sometimes used to describe a no-cost loan, where a borrower pays no closing costs out of his or her own pocket. Sometimes, the lender may cover the closing costs by charging you a higher interest rate. Other times, the lender adds the closing costs to the loan amount. Both methods would involve no cash to close the loan, but result in a higher monthly payment.

    What is a payoff amount? Is my payoff amount the same as my current balance?

    Your payoff amount is how much you will actually have to pay to satisfy the terms of your mortgage loan and pay off your debt. Your payoff amount is different from your current balance, which is the amount you owe as of the date of your statement. Your payoff amount also includes the payment of any interest you owe through the day you intend to pay off your loan, and it may include other fees you have incurred and not paid.

    If you are paying off your loan early, you may have to pay a pre-payment penalty. If you are considering paying off your mortgage, you can request a payoff amount from your lender or servicer. If your loan is a “closed-end” loan secured by your “principal dwelling,” once you request a payoff amount servicers must provide you with an accurate statement of the total amount that would be required to satisfy your obligation in full as of a specified date. You can have only one principal dwelling at a time, so this does not include a vacation or other second home.

    What is a Qualified Written Request? What is a QWR?

    A Qualified Written Request (QWR) is written correspondence that you or someone acting on your behalf can send to your servicer to ask for information relating to the servicing of your loan or to dispute errors about your loan account.

    Your request must:

    • Be made on its own, so do not write your question on your payment coupon or mortgage statement
    • Include or provide enough information for the servicer to identify the name and account of the borrower
    • Contain a statement of the reasons you believe that the servicer has made an error with respect to your account or contain a detailed explanation as to other information relating to the servicing of the loan that you are requesting.

    The U.S. Department of Urban Housing and Development (HUD) provides a sample QWR on its website that you can follow.

    Your QWR should:

    • Be sent certified mail, return receipt requested so you will have confirmation that your letter arrived
    • Be sent to the address that the servicer uses for receiving QWRs (this may be different from where you send your payment or even different from the customer service address)
    • Contain the words: “This is a Qualified Written Request’ under Section 6 of the Real Estate Settlement Procedures Act (RESPA)”

    Once your servicer receives the request, it has 20 business days to acknowledge your inquiry. You servicer also has no later than 60 business days after it receives your QWR to either provide you in writing with the information or clarification, make the correction you request, or let you know why it believes it cannot provide you with the information or that there has not been a mistake and your account information is correct.

    The response from your servicer must include the name and telephone number for the individual, office, or department of the servicer who can provide you with additional assistance if you have any questions. While you are waiting for a response, you should continue making your mortgage payments as scheduled.

    What is a reverse mortgage?

    A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the equity in their homes. It is called “reverse” because you receive money from the lender, instead of making payments to the lender. The money you receive, and the interest charged on the loan, increase the balance of your loan each month. Over time, the equity you have in your home decreases as the amount you owe increases.

    When you take out a reverse mortgage loan, you can receive your money as a line of credit available when you need it, in regular monthly installments, or up-front as a lump sum. You do not have to pay back the loan as long as you continue to live in the home, maintain your home, and stay current on expenses such as homeowner’s insurance and property taxes. If you move or die, the loan becomes due and must be paid off. In most cases the home will need to be sold in order to repay the loan.

    Most reverse-mortgage loans are insured by the Federal Housing Administration (FHA). Some lenders may also offer proprietary (non-government insured) reverse mortgages, which are typically designed for homeowners with high home values.

    TIP: If you or your parents are considering a reverse mortgage, make sure you get all the facts first:

  • Download this helpful consumer guide from the CFPB's Office for Older Americans.
  • Talk to a reverse-mortgage counselor. Find a HUD-approved counselor by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).
  • What is a second mortgage loan or "junior-lien"?

    A second mortgage or junior-lien is a loan you take out using your house as collateral while you still have another loan secured by your house. Home equity loans and home equity lines of credit (HELOCs) are common examples of second mortgages. Some second mortgages are “open-end” (meaning you can continue to take cash out up to the maximum credit amount and, as you pay down the balance, can draw again up to the same limit) and other second mortgage loans are “closed-end” (in which you receive the entire loan amount upfront and cannot redraw after that).

    The term “second” means that if you can no longer pay your mortgages and your home is sold to pay off the debts, this loan is paid off second. If there is not enough equity to pay off both loans completely, your second mortgage loan lender may not get the full amount it is owed. As a result, second mortgage loans often carry higher interest rates than first mortgage loans. 

    By taking out a second mortgage, you are adding to your overall debt burden. Anytime you add on to your overall debt burden, you make yourself more vulnerable in case you then experience financial difficulties that affect your ability to repay your debts. It is important to know that a major risk with home equity loans or home equity lines of credit is that if you cannot repay a home equity loan or home equity line of credit, you could potentially lose your home because you are using the equity in your home as collateral.

    Tip: Be careful using home equity to consolidate higher interest debts. When you use home equity to pay off other debts you really aren’t paying them off. You are merely taking out one loan to repay another. The interest rates may be lower in the short term, but that’s only because you are using your home as collateral. The risk is that if you can’t repay your home equity loan, you could lose your home.

    Plus, if you take on more debt, that could make repaying that new debt and existing loans difficult. For example, taking out a mortgage to pay off a five year car loan may have you making payments and paying additional interest for ten, fifteen, or even thirty years. Be careful about trading short-term debt for long-term debt at a higher cost to you.

    What is a short sale?

    A short sale is a sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but requires you to leave your home.

    If your lender or servicer acting on the lender’s behalf agrees to a short sale, you may be able to sell your home to pay off your mortgage, even if the sale price or proceeds turn out to be less than the balance remaining on your mortgage.

    If you live in a state in which you are responsible for any deficiency between the sale price for your home and the amount you still owe on your mortgage loan, you will want to ask your lender or servicer acting on your lender’s behalf to waive the deficiency before you go through with a short sale. The deficiency is the difference between the amount owed on a loan and the total amount collected from the sale proceeds. In some states, after a short sale, your lender could sue you to collect the amount of the deficiency. Getting a waiver of deficiency means that the lender waived the right to collect this amount. If the lender waives of the deficiency, get the waiver in writing and keep it.

    If you choose this option, a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor can help you plan your next steps. Borrowers who are seeking short sales should also ask about help with relocation expenses, either under the federal government’s Home Affordable Foreclosure Alternatives Program (HAMP) under other private programs sometimes called “cash-for-keys.” For help in exploring your options call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    What is a subprime mortgage?

    A subprime mortgage carries an interest rate higher than the rates of prime mortgages. Prime mortgage interest rates are the rates at which banks and other mortgage lenders may lend money to customers with the best credit histories. Prime mortgages can be either fixed or adjustable rate loans. More often, subprime mortgage loans are adjustable rate mortgages (ARMs). A subprime mortgage is generally a loan that is meant to be offered to prospective borrowers with impaired credit records. The higher interest rate is intended to compensate the lender for accepting the greater risk in lending to such borrowers. The interest rate on subprime and prime ARMs can rise significantly over time.

    TIP: Remember that lenders and brokers generally are not obligated to offer you the best deal available. Just because you are offered a subprime mortgage does not mean you won’t qualify for a prime mortgage with another lender. You may also qualify for an FHA loan.

    What is a USA Rural Housing Service loan?

    The Rural Housing Service (RHS) offers mortgage programs that can help low- to moderate-income rural residents purchase, construct, and repair homes. The RHS both lends directly to qualified borrowers and guarantees loans that meet RHS program requirements made by approved lenders.

    The RHS is part of the U.S. Department of Agriculture (USDA). To learn more about RHS or USDA loan programs, including whether you might qualify for one, visit RHS’s website or call (202) 720-2791.

    What is a VA loan?

    The Department of Veterans Affairs (VA) offers loan programs to help servicemembers, veterans, and their families buy homes. The VA does not make loans, but rather sets the rules for who may qualify, arranges the terms under which mortgages may be offered, and guarantees any loan made under the program. Some VA loans are available with no down payment.

    To learn more about VA loan programs, including whether you might qualify for one, visit the Department of Veterans Affairs website or call 1-800-827-1000.

    What is an appraisal?

    An appraisal report contains an opinion on what your property is worth and the reasons the appraiser reached that opinion. You have a right to receive a copy of your home appraisal report if you make a written request after submitting your application. Your lender can charge you for the cost of the appraisal, but not for obtaining a copy of your appraisal report.

    What is an escrow or impound account?

    An escrow or impound account is an account that your lender may set up to pay certain recurring property-related expenses on your behalf, such as property taxes and homeowner’s insurance. These expenses are usually semi-annual or annual and may involve potentially large payments. Lenders often require escrow accounts to ensure you have enough money to pay those bills when they come due. The lender breaks these expenses down into monthly installments and adds them to your mortgage payment each month. If your lender requires an escrow or impound account, your mortgage servicer manages this account and pays the property-related expenses covered by the account on your behalf.

    Sometimes escrow accounts are required by law. Sometimes lenders require escrow accounts to protect their interests in your property. For example, if you failed to pay your taxes, the government could place a lien on your property, which would put the lender at risk. You may be able to cancel your escrow account if you have built up enough equity in your home. If you would like to cancel your escrow account, ask your lender or mortgage servicer when it is permitted. Also, some states require lenders to pay you interest that accrues on your escrow account. If you have an escrow account, you may want to ask your lender about this.

    TIP: If your loan doesn’t include an escrow account, you will have to plan for potentially large property-related expenses, such as property taxes and homeowner’s insurance premiums. Be sure you budget for your monthly mortgage payments plus these extra costs and stay current on your taxes and insurance payments. If you fail to pay your property taxes, your state or local government may impose fines and penalties or place a tax lien on your home. In addition, if you fail to pay any of your property-related costs, your lender may add the amounts to your loan balance, add an escrow account to your loan, or require you to pay for insurance on your home that your lender buys on your behalf, which likely would be more expensive and provide fewer benefits than what you could obtain on your own.

    TIP: Even if your lender does not require an escrow account, consider requesting a voluntary escrow account. Although there may be downsides to an escrow account for some people because the money may be placed in a non-interest bearing account, an escrow account could save you from scrambling to pay a potentially large property tax bill or insurance premium.

    What is an FHA loan?

    The Federal Housing Administration (FHA) administers a program of loan insurance to expand homeownership opportunities. FHA provides mortgage insurance to FHA-approved lenders to protect these lenders against losses if the homeowner defaults on the loan. The cost of the mortgage insurance is passed along to the homeowner. The standards for qualifying for these loans are generally more flexible than for conventional loans. 

    The FHA is part of the United States Department of Housing and Urban Development (HUD). To learn more about FHA loan programs, including whether you might qualify for one, visit HUD’s website, call HUD at 1-800-225-5342, or visit GovLoans.gov. HUD also provides a list of qualified FHA lenders.

    What is an initial escrow deposit?

    An initial escrow deposit is the amount that you will pay at settlement to start your escrow account, if required by your lender. This initial amount may be different from what you will pay monthly to maintain the escrow account. This initial amount will be listed in Block 9 of your Good Faith Estimate (GFE) (and Line 1001 of your settlement statement) and may change between your GFE and closing.

    What is an "interest-only" loan?

    An interest-only mortgage is a loan with scheduled payments that require you to pay only the interest for a specified amount of time. The amount that you owe on the loan does not go down with each payment. Once the interest-only period ends, you may have several options:

    • Paying off the loan balance all at once
    • Refinancing the mortgage loan, if refinancing is available
    • Beginning to pay off the balance in monthly payments, which are higher than the interest-only payments

    TIP: Don't assume you’ll be able to sell your home or refinance your loan if your payment increases. The value of your property could decline or your financial condition could change. If you can’t afford the higher payments on today’s income, consider another loan.

    What is an option or payment-option ARM?

    An option or payment-option ARM is an adjustable rate mortgage with several possible payment choices. Some of the payment choices do not cover the full amount needed to pay down the loan. The payment “options” usually include:

    • Paying an amount that covers both your principal and interest. This is the only way you can reduce the amount you owe on your mortgage loan with each payment.
    • Paying an amount that covers only your interest. Interest-only payments do not pay down your principal, or the amount you borrowed.
    • Paying a minimum (or limited) amount that does not even cover the interest. The interest you do not pay will be added to your principal loan balance. This increases the amount of debt you owe.

    Tip: If you have an option ARM or a payment-option ARM, always try to pay all of the interest and some of the principal when making your mortgage payment.

    Your mortgage payment includes at least two parts – principal and interest. Principal is what you borrowed from the lender. Interest is what the lender charges you for the use of the money you borrowed. Your payment may also include the cost of taxes and insurance if you have an escrow account. If you don’t repay the principal, you are not making any progress in paying back the debt. If you are not paying all the interest, it will get added to what you owe.

    If you have a payment-option ARM and you’re regularly skipping your principal or full interest payments to make ends meet, you may be heading for trouble.

    TIP: Try to avoid paying interest on interest.

    Certain loans have payment options that let you pay only a portion of the amount of interest you owe each month. If you only pay some of the interest, the amount that you do not pay may get added to your principal balance. Then you end up paying not only interest on the money you borrowed, but interest on the interest you are being charged for the money you borrowed. This dramatically increases the amount of debt you have and the cost of the loan. To keep your debt from growing, try to pay down all of the interest and at least some of the principal you owe each month.

    What is forbearance?

    Forbearance is a temporary reduction in or suspension of your mortgage payments. Your servicer may grant you forbearance if you recently lost your job or suffered from a disaster or from an illness or injury that increased your health care costs.

    If you are unemployed, you may qualify for the Home Affordable Unemployment Program or the Hardest Hit Fund, two federal programs that grant temporary relief to homeowners who have lost their jobs. For help in exploring your options call the CFPB at 1-855-411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor today.

    What is homeowner's insurance?

    Homeowner’s insurance includes charges for insurance your lender will probably require you to buy to protect the property from hazards such as fire and theft. Standard homeowner’s insurance does not cover damage from earthquakes or floods, but it may be possible to add such coverage. The cost of your homeowner’s insurance, as well as any similar insurance to protect the property, will be listed in Block 11 of your Good Faith Estimate (GFE) (and on Line 903 of your settlement statement) and may change between your GFE and closing.

    What is lender’s title insurance?

    Lender’s title insurance protects your lender against problems with the title to your property that occurred before the date of the policy. A lender’s title insurance policy protects your property but does not protect your personal interest in the property. If you want protection against any defects in your property title, you must buy an owner’s title insurance policy.

    What is negative amortization?

    Amortization means paying off a loan with regular payments. Negative amortization means that even when you pay your minimum payment, because you are not paying the interest, the amount you owe will still go up. Your lender may offer you the choice to make a minimum payment that doesn’t cover the interest you owe. The unpaid interest gets added to the amount you borrowed, and the amount you owe increases.

    Tip: Try to avoid paying interest on interest.

    Certain loans have payment options that let you pay only a portion of the amount of interest you owe each month. If you only pay some of the interest, the amount that you do not pay may get added to your principal balance. Then you end up paying not only interest on the money you borrowed, but interest on the interest you are being charged for the money you borrowed. This dramatically increases the amount of debt you have and the cost of the loan. To keep your debt from growing, try to pay down all of the interest and at least some of the principal you owe.

    What is owner’s title insurance?

    A basic owner’s title insurance policy protects you against problems with the title to your property that occurred before the date of the policy. This policy is separate from the lender’s title policy. You have to buy an owner’s title insurance policy if you want insurance against any defects in your property title that will affect your interest. Even though you may pay for lender’s title insurance, it does not specifically protect your interest.

    The cost of your owner’s title insurance will be listed in Block 5 of your Good Faith Estimate (GFE) (and on Line 1103 of your settlement statement). It may change between your GFE and closing if you do not use companies your loan originator identifies, but if you use companies your loan originator identifies it generally cannot increase by more than 10 percent.

    What is PITI?

    Principal, Interest, Taxes, and Insurance, known as PITI, are the four basic elements of a monthly mortgage payment. Your payments of principal and interest go toward repaying the loan. Amounts that cover property taxes and homeowner’s insurance may go into an escrow account, if you are required or choose to have one, to cover your property tax and homeowner’s insurance payments as they come due.

    What is private mortgage insurance? How does PMI work?

    Private mortgage insurance (PMI) protects the lender if you stop making payments on your loan. Lenders may require you to purchase PMI if your down payment is less than 20 percent of the sales price or the appraised value of the home. PMI premiums are added to your monthly mortgage payment. You may be able to cancel private mortgage insurance after a few years based on certain criteria, such as paying down your loan balance to a certain amount.

    TIP: If you are making a down payment of less than 20 percent, be sure you know if PMI is required and how much the PMI will add to your monthly payments. Not making on-time payments may delay when you can cancel your PMI. Before you commit to paying for mortgage insurance, find out the specific requirements for cancellation.

    TIP: Don’t confuse PMI with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower’s death or disability.

    What is “seller financing?”

    Seller financing is a loan that the seller of your home makes to you. This could be instead of or in addition to borrowing from a traditional lender. Seller financing might be offered when you cannot qualify for a bank loan for the full amount or when you are assuming a portion of an earlier mortgage taken out by the seller and need a loan for the rest. Always tell a lender about seller or any additional financing you are receiving.

    TIP: If you accept seller financing, be sure you have an independent appraisal so that you know how much the house is worth. You do not want to overpay for the house just because the seller is providing financing.

    What is the difference between a fixed-rate and adjustable-rate mortgage (ARM) loan?

    With a fixed rate mortgage, the interest rate is set when you take out the loan and will not change.

    With an adjustable rate mortgage (ARM), the interest rate may go up or down. Many ARMs will start at a lower interest rate than fixed rate mortgages. This initial rate may stay the same for months or years. When this introductory period is over, your interest rate will change and the amount of your payment will likely go up.

    Part of the interest rate you pay will be tied to a broader measure of interest rates, called an index. Your payment goes up when this index of interest rates moves higher. When interest rates decline, sometimes your payment may go down, but that is not true for all ARMs. Many ARMs will limit the amount of each adjustment, and set a maximum or “cap” on how high your interest rate can go over the life of the loan. Some ARMs also limit how low your interest rate can go.

    TIP: Know how your ARM adjusts. Before taking out an adjustable rate mortgage, find out:

    • How high your interest rate and monthly payments can go with each adjustment
    • How frequently your interest rate will adjust
    • How soon your payment could go up
    • If there is a cap on how high your interest rate could go
    • If there is a limit on how low your interest rate could go
    • If you will still be able to afford the loan if the rate and payment go up to the maximums allowed under the loan contract

    TIP: Don't assume you’ll be able to sell your home or refinance your loan before the rate changes. The value of your property could decline or your financial condition could change. If you can’t afford the higher payments on today’s income, you may want to consider another loan.

    What is the difference between a Home Equity Loan and a Home Equity Line of Credit?

    With a home equity loan, you receive the money you are borrowing in a lump sum payment and you usually have a fixed interest rate. With a home equity line of credit (HELOC), you have the ability to borrow or draw money multiple times from an available maximum amount. Unlike a home equity loan, HELOCs usually have adjustable interest rates.

    If you are having trouble paying your mortgage, before taking out a home equity loan or home equity line of credit, talk to a housing counselor to see if there may be other options that make better financial sense for you. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    What is the difference between an interest rate and an APR?

    There are many costs associated with taking out a mortgage. These include the interest rate, points, fees, and other charges.

    The interest rate is the cost of borrowing money expressed as a percentage rate. It does not reflect fees or any other charges you may have to pay for the loan.

    An Annual Percentage Rate (APR) is a broader measure of cost to you of borrowing money. The APR reflects not only the interest rate but also the points, broker fees, and certain other charges that you have to pay to get the loan, including certain of your closing costs. For that reason, your APR is usually higher than your interest rate.

    TIP: Take care when comparing the APRs of adjustable-rate loans. For adjustable rate loans, the APR does not reflect the maximum or even the likely interest rate your loan may carry. This is important to keep in mind when comparing the APRs of fixed-rate loans with adjustable-rate loans, or among different adjustable-rate loans. Don’t look at the APR alone in determining what loan makes the most sense for your circumstances.

    What is the most important thing for me to do when I get my closing papers?

    Carefully review all documents that you receive at or before the closing to make sure that the terms of your mortgage have not changed. For example, compare the closing cost items listed on your Good Faith Estimate (GFE) to those on the HUD-1 Settlement Statement by using the Comparison Chart on page three of the HUD-1 and make sure your closing costs have not increased more than is allowed. Ask about any fee you do not understand. You should also review the initial and final Truth-in-Lending disclosures to ensure that the payments are what you expected. Your note will also further describe your legal obligations.  

    TIP: Make sure you keep the GFE for the loan you select to compare it with your final settlement costs. You can use the GFE and the Comparison Chart on the HUD-1 to see if there have been changes in fees. Ask your lender for an explanation of any changes you see and do not sign papers you do not understand.

    What kind of assistance can I get after a natural disaster?

    Relief organizations like the Red Cross can help you with your immediate needs in a disaster. Local organizations will establish shelters, provide vouchers for meals, clothing and a limited amount of personal goods. If you are in a presidentially declared disaster area, the Federal Emergency Management Agency (FEMA) will help you find disaster assistance.

    What kind of down payment do I need? How does the amount of down payment I make affect the terms of my mortgage loan?

    There are many options for making down payments. The amount of your down payment will vary by the loan you choose and the lender’s requirements. Generally, the larger the down payment you are able to make, the lower the interest rate you will receive and the more likely you are to be approved. If you cannot make a down payment of 20 percent, lenders usually will require you to purchase private mortgage insurance or obtain an FHA, VA, or USDA loan.

    TIP: Ask about how your down payment affects your interest rate and what options you have when you shop around for different loans.

    TIP: Don’t forget to factor in all the upfront costs you will have in addition to the down payment. Think about all the costs that you’ll likely have to deal with during the purchase process and immediately afterward. For example, you may want to pay points to lower your interest rate. You’ll also have to pay closing costs, which sometimes can be substantial. And don’t forget about the cost of moving and making any repairs that are needed right away.

    What kind of information may be available on my periodic mortgage statement?

    Not everyone receives a periodic mortgage statement. Some people may receive a coupon book. To see a sample mortgage statement, visit the Making Home Affordable website. Some common terms and information found on mortgage statements include your:

    • Servicer Contact Information – name, address, and phone number of the company that is servicing your loan.
    • Loan Number – the account number for your loan.
    • Interest Rate – the amount charged for the use of the money you borrow.
    • Taxes Paid/Escrow Balance – how much property tax has been paid by the servicer for the year and how much money is remaining in the escrow account.
    • Total Monthly Payment – the total amount due each month. The total monthly payment generally includes amounts for principal, interest and taxes, and insurance, if escrowed. In some cases, the borrower may decide not to escrow the taxes and insurance and pay them separately from the mortgage payment.
    • Principal Payment – the dollar amount included in the monthly payment that pays down the amount you owe. Principal is the amount of money owed on the loan, not including interest.
    • Interest Payment – the dollar amount of interest included in your monthly payment.
    • Escrow –the amount placed into an escrow account to pay for items such as property taxes or insurance.

    What kinds of fees are involved with my mortgage loan?

    Your loan often involves many fees, such as your lender’s origination or underwriting fees, broker fees, and fees for services the lender requires to originate your loan. In addition, obtaining your loan will include other settlement costs, such as initial escrow payments if you establish an escrow or impound account, taxes, and other government fees. Every lender or mortgage broker should be able to give you an estimate of these fees and costs before you apply for a loan. After you apply, the lender or broker must provide you with certain disclosures, including a Good Faith Estimate (GFE) form, which will list the estimated fees and costs you are likely to pay for taking out the loan.

    What papers should I get after I decide on the type of loan and choose my lender or mortgage broker?

    Unless the lender denies your application, you should look for these four important documents either at or shortly after application:

    1. Good Faith Estimate (GFE) disclosure. Generally, the lender is required to send to you the GFE within three business days after your application. It explains the basic loan terms and the costs you are likely to pay at the closing for the loan. If you decide to proceed with the loan, this form should give you a reliable estimate of most of the costs involved.

    2. Truth-In-Lending disclosure.Generally, the lender is required to send you an initial Truth-In-Lending disclosure statement no later than three business days after your application. It will include the following information:

    • Your annual percentage rate (APR)
    • Your finance charge
    • The total of payments (the amount you will have paid after you have made all of your scheduled mortgage payments)

    3. Mortgage Servicing Disclosure. For many mortgage loans, the lender must provide you with the Mortgage Servicing Disclosure at the time your mortgage application is submitted or send it within three business days. This statement will tell you whether the lender may sell the servicing rights of its loans. If the servicing rights are sold, you will be dealing with a different servicer once you begin making payments on your loan.

    4. Settlement Cost booklet.The booklet will include information on the various stages of the home-buying process, home sale and purchase agreements, the Good Faith Estimate, required settlement services to close your loan, and the HUD-1 Settlement Statement that you will receive at closing.

    In some cases you may receive additional information that will allow you to shop for loans with different lenders to find the loan most appropriate to your needs:

    • If you are considering a loan with an adjustable rate, you should receive a booklet called the Consumer Handbook on Adjustable Rate Mortgages before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.
    • If you are considering a home equity line of credit, you should receive a booklet called What You Should Know About Home Equity Lines of Credit before you pay a non-refundable fee or are provided with an application to complete, whichever is earlier.

    Take some time to review each document as you receive it. If you have questions, ask for an explanation from your lender or broker. In addition, make sure to use the information given to you after application to help you compare the costs of loans that you have been offered.

    What papers should I get at or before loan closing?

    At closing, or before you go to closing, you should receive:

    • A HUD-1 Settlement statement, which should show all of the costs of your loan, as well as who will be receiving payments from the loan. You will receive the HUD-1 at closing, but you have the right to request it one day prior to closing. 
    • Various disclosures required by state law.

    Also, if your mortgage servicer is establishing an Escrow Account for your mortgage, you should receive an Initial Escrow Statement at settlement or within 45 calendar days of settlement, which lists the estimated taxes, insurance premiums and other charges the lender anticipates paying from your escrow account during the first year of your loan.

    For many mortgage loans, at the time your mortgage application is submitted, or within three business days after its submission, the lender must provide you with or send the Mortgage Servicing Disclosure statement, which will tell you whether the lender may sell the servicing rights of its loans. If the servicing rights are sold, you will be dealing with a different servicer once you begin making payments on your loan.

    Additionally, at closing or three days before closing, the lender will likely give you a final Truth-in-Lending disclosure which sets forth certain costs of your mortgage such as how much you pay over the full term of the loan, what your mortgage payment will be initially and the maximum payment under your loan. If your annual percentage rate (APR) changes enough to exceed regulatory requirements, the lender must give you a corrected final Truth-in-Lending disclosure.

    Take some time to review each document as you receive it. If you have questions, ask for an explanation from your lender or broker.

    At the closing, obtain or have sent to you a complete set of the closing documents that you have signed, including your note and mortgage. Keep these documents for your records.

    What should I discuss with a housing counselor to make sure I fully understand what getting a reverse mortgage will mean for me?

    Here are some things you might want to discuss with a housing counselor if you are considering a reverse mortgage:

    • The cost of the counseling (if any) and whether you might qualify for a fee waiver
    • A basic description of the way a typical reverse mortgage loan works, including whether you will receive the money in a lump sum, in monthly installments, or as a line of credit
    • The different types of reverse mortgage products, for example, loans with adjustable or fixed interest rates
    • Any fee you would have to pay to get the reverse mortgage, such as fees for mortgage insurance, loan origination, credit reports, property inspection, appraisals, and title searches
    • Any monthly fees associated with the reverse mortgage, such as monthly service fees
    • When the reverse mortgage will come due and what happens if you have to move out of the home or want to sell the home
    • If someone else is living in the home with you, would they be able to stay in the home if you had to move into a nursing home or assisted living or died
    • How you will pay your property taxes and insurance
    • What other qualifications you would have to meet to be eligible for a reverse mortgage
    • The rules for selling other products, such as annuities, along with reverse mortgages
    • If the counseling is done over the phone, ask them to send you the comparisons of any types of loans discussed and any other relevant information
    • If you have already discussed a reverse mortgage with a lender before speaking with a counselor, tell your counselor about any other products you were offered, such as an annuity

    You can receive counseling about reverse mortgages in person or by phone, but in-person counseling might be more effective in helping you understand the costs and risks associated with this complex product.

    What required services can I shop for?

    To figure out which services you can shop for you will need your Good Faith Estimate (GFE).

    You can shop for all of the services listed in Blocks 5 and 6 on page two of your GFE. You can also shop for title services and lender’s title insurance (Block 4), if your lender or mortgage broker permits.

    When a lender or a mortgage broker permits you to shop for settlement services, the lender or the mortgage broker must provide you with a written list of settlement service providers when they give you the GFE.

    What should I consider when dealing with an insurance adjuster?

    Once your insurance claim is received, the insurance company may send out an adjuster to look at the property damage and help you through the claims process. In many states you can also hire public adjusters. A public adjuster represents you as the claimant, but will charge you a percentage of your settlement.

    Be careful if you choose to hire a public adjuster. Be sure the adjuster is licensed to do business in your state. Avoid adjusters who come from out of state or who knock on your door looking for business. Other warning signs to watch for are:

    • Adjusters who charge big upfront fees. Don’t pay a lot before you know if the adjuster is going to help you.  Many states put a limit on fees.
    • The adjuster refers you to a contractor. Dishonest adjusters will sometimes work with contractors that give them kickbacks.
    • Avoid any adjuster or advisor who asks you to make a false or inflated claim. This is fraud against the insurance company.
    • Avoid hiring a public adjuster who asks you for a suspicious amount of personal information. Some con artists may pose as adjusters to steal your personal information.

    What should I discuss with a housing counselor to make sure I fully understand what getting a reverse mortgage will mean for me?

    Here are some things you might want to discuss with a housing counselor if you are considering a reverse mortgage:

    • The cost of the counseling (if any) and whether you might qualify for a fee waiver
    • A basic description of the way a typical reverse mortgage loan works, including whether you will receive the money in a lump sum, in monthly installments, or as a line of credit
    • The different types of reverse mortgage products, for example, loans with adjustable or fixed interest rates
    • Any fee you would have to pay to get the reverse mortgage, such as fees for mortgage insurance, loan origination, credit reports, property inspection, appraisals, and title searches
    • Any monthly fees associated with the reverse mortgage, such as monthly service fees
    • When the reverse mortgage will come due and what happens if you have to move out of the home or want to sell the home
    • If someone else is living in the home with you, would they be able to stay in the home if you had to move into a nursing home or assisted living or died
    • How you will pay your property taxes and insurance
    • What other qualifications you would have to meet to be eligible for a reverse mortgage
    • The rules for selling other products, such as annuities, along with reverse mortgages
    • If the counseling is done over the phone, ask them to send you the comparisons of any types of loans discussed and any other relevant information
    • If you have already discussed a reverse mortgage with a lender before speaking with a counselor, tell your counselor about any other products you were offered, such as an annuity

    You can receive counseling about reverse mortgages in person or by phone, but in-person counseling might be more effective in helping you understand the costs and risks associated with this complex product.

    What should I do if the house or apartment I’m renting goes into foreclosure?

    Under federal law – the Protecting Tenants at Foreclosure Act (PTFA) – you have certain protections if your rental house or apartment goes into foreclosure:

    • Notice before you can be evicted. You have the right to a 90-day notice period before you can be evicted if you have a valid lease.
    • The right to continue renting. You have the right to continue renting the property if you signed the lease before the foreclosure notice. If the new owners will occupy the property as their primary residence or if you do not have a lease or have a lease that can be terminated at will under State law, then the new owners are only required to allow you to occupy the property until the 90-day notice period ends.  Otherwise, they must allow you to occupy the property for the remaining term of the lease.

    There are some exceptions to these protections. You are not protected under the PTFA if:

    • You are the borrower who was foreclosed upon.
    • You are the child, spouse or parent of the borrower who was foreclosed upon.
    • The lease was not the result of an arms-length transaction. An arm's length transaction is an agreement made by two parties freely and independently of each other, and without some special relationship, such as being a relative, having another deal on the side or one party having complete control of the other.
    • The rent you are required to pay is substantially less than fair market rent (unless the rent is reduced or subsidized under a Federal, State, or local subsidy).

    State and local laws may offer you additional protections, so you should contact an attorney familiar with tenant rights to learn more. Be sure to ask for an attorney with experience helping tenants living in foreclosed properties.

    Another resource is the Renters in Foreclosure Toolkit from the National Low Income Housing Coalition, which includes sample letters that you can send to the new owners of foreclosed properties and judges informing them about the requirements of the Protecting Tenants at Foreclosure Act. These sample letters can help you explain the PTFA and your rights as a tenant because some property owners, attorneys, and judges may not be familiar with the PTFA and your rights as a tenant living in a foreclosed house or apartment. You may also qualify for free legal services. Please refer to the list of state legal aid services included below.

    The Protecting Tenants at Foreclosure Act expires on December 31, 2014. This summary will be updated if the Protecting Tenants at Foreclosure Act is extended by the United States Congress.

    You may also want to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What should I do if I have a reverse mortgage and I can’t pay my property taxes or insurance?

    If you don’t pay your reverse mortgage property taxes and insurance, you could face foreclosure and eviction. However, if you can’t afford to pay, there might be local programs or other options that can help you keep your home. To help you make the best choices for your situation, you should talk to a reverse mortgage foreclosure prevention counselor. This special type of counseling is available for free.  To find a counselor, call one of the five national counseling agencies and ask for HECM  foreclosure prevention counseling:

    • National Council on the Aging: 1-800-510-0301
    • CredAbility: 1-888-395-2664
    • Money Management International: 1-866-765-3328
    • National Foundation for Credit Counseling: 1-866-363-2227
    • NeighborWorks America: 1-888-990-4326

    If you are facing imminent foreclosure or have been served with related legal papers, you may also need to consult an attorney. If you need help finding an attorney, you can find lawyer referrals in your county and state by visiting the American Bar Association website.

    What should I do if I have a reverse mortgage and I received a notice that I am “delinquent,” “in default,” or behind on my property taxes and insurance?

    If you have received a notice from your reverse mortgage company stating that you are delinquent or in default, you need to act quickly. If you are behind on your reverse mortgage taxes and insurance, you are considered in default on your reverse mortgage and could face foreclosure and eviction. 

    If you can afford to pay your taxes and/or insurance, you should do so immediately. First, find out where you need to submit your payment: call your reverse mortgage company to find out if you should make a payment to the tax authority or insurance company directly or if the reverse mortgage company has already made payment on your behalf. Then, send your payment to the address provided.

    If you can’t afford to pay your taxes and/or insurance, you should see a reverse mortgage foreclosure prevention counselor. This special type of counseling is free and can help you make the best decision for your situation.

    What should I do if my house is destroyed in a natural disaster?

    Contact your insurance company as soon as possible to start the claims process. Also be sure to ask for a copy of your policy if you don’t have one available. This will help you verify your coverage. Take pictures of the damage.

    Your next call should be to your mortgage servicer, if you own your home. Damage to your home does not stop your responsibility to pay your mortgage. Tell your servicer about your situation and take careful notes during the conversation. There may be a number of options available that could help you put off or reduce your mortgage payments. Both Fannie Mae and Freddie Mac have told mortgage servicers that they can help homeowners affected by Hurricane Sandy. You can find out if your mortgage is owned by Fannie or Freddie on their websites.

    If you don’t have a monthly mortgage statement or coupon book with you, search the Mortgage Electronic Registration Systems (MERS) or call them toll-free at (888) 679-6377 to find the company that services your mortgage. You can also call the CFPB at (855) 411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor.

    What should I do when I receive a home insurance settlement?

    When your settlement is paid, the check will probably be made out to both you and your mortgage servicer. Most mortgage agreements require this.

    Your insurance settlement is to rebuild your home. So the amount may be more or less than what you owe on your loan.

    Keep in mind that the market value of your home may not match the insured replacement value. That’s because, in some locations, the materials and labor that go into rebuilding your home may be less than the overall value of your property – its location, desirability and other things that go into housing prices. There are also special laws in various states addressing what happens if your home was insured for less than its replacement value. Your state Department of Insurance or Insurance Commissioner may have useful information. You may also need the advice of a lawyer if your claim is large.

    Typically, your mortgage servicer will release a portion of the settlement money before work begins so you can hire a contractor. When the work is halfway finished, the servicer will typically release more money. The rest will be released once the job is finished and the home passes inspection.

    What should I know about using contractors to rebuild after a disaster?

    Here are some tips when considering contractors to help fix or rebuild your home:

    • Get bids from several local, established contractors.
    • Avoid contractors who are working door to door, come from out of state, don’t provide an address and phone number, or refuse to show identification.
    • Ask if the contractor has the required licenses. Ask for the license number and use your state licensing agency’s website or hotline to make sure it’s valid.
    • Check with licensing agencies to see if the contractor has a history of complaints.
    • Never pay in advance.
    • Never pay in cash.
    • Never provide personal financial information, such as your checking account credit card or debit card numbers.  You might be told this will “speed up payment” to start the repair process. Don’t believe it.
    • If you have to borrow to pay for repairs, don’t let the contractor steer you toward a particular lender.
    • Never sign anything before carefully reading it.

    The Coalition Against Insurance Fraud has more information on avoiding adjuster and contractor scams.

    What will reverse mortgage housing counseling cost?

    Housing counselors are permitted to charge for reverse mortgage counseling, but the agency must tell you about the fee before charging it, and the fee has to be reasonable. Fees are typically about $125.  Counseling agencies are also required to waive the counseling fee if your income is less than twice the poverty level.

    • TIP: Make sure your reverse mortgage counselor is approved by the U.S. Department of Urban Development (HUD).  You can find HUD-approved housing counselor by visiting HUD's counselor search page or calling HUD’s housing counselor referral line (1-800-569-4287).

    • TIP:  If you are behind on your taxes and insurance and you are facing foreclosure, you can receive free reverse mortgage foreclosure prevention counseling. To find a specialist counselor, call one of the five national counseling agencies and ask for HECM foreclosure prevention counseling:

      • CredAbility: 1-888-395-2664
      • Money Management International: 1-866-765-3328
      • National Council on the Aging: 1-800-510-0301
      • National Foundation for Credit Counseling: 1-866-363-2227
      • NeighborWorks America: 1-888-990-4326

    If you paid someone up-front for counseling and they never provided counseling to you, or if someone is offering you counseling only if you purchase an insurance or financial product along with your reverse mortgage, report the agency and counselor by filing a complaint with the CFPB by calling 1-855-411-CFPB (2372).

    What’s a housing counselor?

    A legitimate housing counselor is specially trained to help you assess your financial situation, evaluate options if you are having trouble paying your mortgage loan and make a plan to get you the help you need. Unlike a broker, servicer, or another representative of your mortgage loan company, a housing counselor can offer independent advice. These services are often provided at little or no cost to you. Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through the U.S. Department of Housing and Urban Development (HUD)’s Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counselor today.

    What's a lock-in or a rate lock?

    After you have considered your options and selected a loan, you may want to obtain a written “rate lock” or “lock-in” agreement from the lender or broker. A rate lock or lock-in agreement is a written agreement that guarantees you a specific interest rate on your mortgage loan, as long you close the loan within a specified period of time, usually from 30 to 90 days. You should ensure your rate lock agreement is long enough to cover the time until you close on your loan. Some lenders require you to have already found a home in order to lock in an interest rate.

    The rate lock or lock-in should include the interest rate that you have agreed upon, the number of points to be paid, if any, and the length of the lock-in.

    If your rate lock or lock-in agreement expires before you are able to close, your lender may offer to extend it. Often, lenders will charge a fee for such an extension. If you are concerned about closing within your rate lock period, you may want to discuss whether your lender charges a fee for an extension when you are deciding whether to lock in an interest rate.

    Also, while rate locks and lock-ins can protect you from rate increases while your loan is being processed, you may not be able to take advantage of lower interest rates if rates fall. Some lenders offer rate lock agreements with a “float down” policy for certain types of loans, which allows you to lock in at the lower rate if interest rates decrease. Ask your lender if its rate lock agreement includes a float down policy, and what types of loans are covered by that policy.

    What is the difference between a mortgage broker and a mortgage lender?

    A lender is a financial institution that makes loans directly to you. A broker does not lend money. A broker finds a lender. A broker may work with many lenders.

    Whether you use a broker or a lender, you should always shop around for the best loan terms and the lowest interest rates and fees.

    What’s the difference between a mortgage lender and a servicer?

    Your mortgage lender is the financial institution that loaned you the money. Your mortgage servicer handles the day-to-day tasks of managing your loan. Your loan servicer typically processes your loan payments, responds to borrower inquiries, keeps track of principal and interest paid, manages your escrow account, and may initiate foreclosure if you miss too many loan payments. Your servicer may or may not be the same company that gave you your loan.

    TIP: To find out who your servicer is:

    • Check your monthly mortgage billing statement or payment coupon book
    • Dial the MERS® Servicer Identification System toll-free at 888-679-6377 or visit the MERS® website. Your loan servicer’s identity may be listed in the MERS system.

    What’s the difference between being prequalified and preapproved for a mortgage?

    Prequalification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. Prequalification does not mean you will get the loan. Prequalifications are usually free.

    Preapproval usually means that the lender is ready to make you a mortgage loan based on the information and documentation you provided at the time you requested a preapproval. The preapproval will say how long it is valid for and may contain some other conditions for you to get the loan. Your lender may not require that you pay any fees except the cost of a credit report at this time.

    When can I remove private mortgage insurance from my loan?

    To remove PMI that you pay on your mortgage loan, you must be up to date with your monthly payments. If you are, and if your mortgage closed on or after July 29, 1999, federal law generally provides two ways for you to remove PMI from your loan: canceling PMI or PMI termination.

    Request PMI cancellation

    The Homeowners Protection Act gives you the right to request that your lender cancel PMI when you have reached the date when the principal balance of your mortgage is scheduled to fall to 80 percent of the original value of your home. This date should have been given to you in writing on a PMI disclosure form when you received your mortgage. If you cannot find the disclosure form, contact your lender.  

    You can also make this request earlier if you have made additional payments to reduce the principal balance of your mortgage to 80% of the original value of your home.  

    There are other important criteria you must meet if you want to cancel PMI on your loan.  Specifically:

    • your request must be in writing;
    • you must have a good payment history and be current on your payments;
    • your lender may require you to certify that there are no junior liens (such as a second mortgage) on your home;
    • your lender can also require you to provide evidence (for example, an appraisal) that the value of your property hasn’t declined below the value of the home when you first bought it.  If the value of your home has decreased, you may not be able to cancel PMI.

    If you meet these requirements your servicer generally must cancel your PMI when you request it.

    Automatic PMI termination

    Even if you don’t ask your lender to cancel PMI, your lender still must terminate PMI on the date when your principal balance is scheduled to reach 78% of the original value of your home.  You also need to be current on your payments on the anticipated cancellation date. Otherwise, PMI will not be terminated until shortly after your payments are brought up to date.

    It’s worth noting a termination request is different than a cancelation request.  Your lender must terminate PMI even if the principal balance of your loan has not actually reached 78% of the original value of your home – for example, because the value of your home declined.

    Final PMI termination

    There is one other important requirement that some homeowners need to be aware of:  your lender must terminate PMI if you reach the midpoint of your loan’s amortization schedule before the 78% date. The midpoint of your loan’s amortization schedule is halfway through the life of your loan. Most loans are 30-year loans, so the midpoint would occur after 15 years have passed.  

    Termination of PMI at the loan’s midpoint may occur before reaching 78% of the original value of your home for people who have a mortgage with an interest-only period, principal forbearance, or a balloon payment. Keep in mind that you must be current on your monthly payments for termination to occur.  

    If your loan is guaranteed by the Federal Housing Administration (FHA) or Department of Veterans Affairs (VA), these rules generally won’t apply.  If you have questions about mortgage insurance on an FHA or VA loan, contact your servicer.

    If you have lender-paid mortgage insurance, different rules apply.

    When do I get a HUD-1?

    Upon request, you have the right to receive your HUD-1 with as much information as available on the business day before the date of settlement or closing. Contact the company that is conducting your closing about receiving a copy of your HUD-1 Settlement Statement. The final HUD-1 should be given to you at closing.

    When do I have to pay back a reverse mortgage loan?

    A reverse mortgage loan becomes due when the last surviving borrower dies, sells the home, or permanently moves out of the home. Typically, a “permanent move” means that neither you nor any other co-borrower has lived in your home for one continuous year. The loan also becomes due if you default on the loan by not paying your property taxes or homeowner’s insurance, or if the property condition deteriorates and you do not make necessary repairs.

    When does the lender have to disclose the final interest rate?

    Your lender has to disclose your final interest rate again only if it changes. After you applied for a mortgage, you should receive a Good Faith Estimate (GFE) that indicated the interest rate the GFE was based on. If you locked your interest rate, your lender must honor that rate, unless the rate lock expires.

    If your lender raises your interest rate above your locked in rate and the rate lock has not expired, you should ask for an explanation. Before signing, make sure the settlement agent, lender, or broker is permitted to change the rate and only sign if you are sure you can pay the higher payments on the loan.

    When will my lender run or obtain a copy of my credit report?

    Your lender will run your credit report when you apply for a mortgage. (It cannot pull your credit report if you just call to ask about rates.) It will also pull your score again just before you close on a loan.

    TIP: Be careful how you use credit between the time you apply for a mortgage and your loan closing. Opening a lot of new credit cards or maxing out existing cards, for example, can lower and damage your credit score significantly. This may affect the rate you can get on a mortgage.

    Where can I find more information about HARP, and what is HARP 2.0?

    If the value of your home has fallen, the federal government’s Home Affordable Refinance Program (HARP) or the FHA Short Refinance Program may provide you with additional refinancing options. HARP 2.0 is what some people call the most recent updates to the program. Call us at (855) 411-CFPB (2372) to be connected to a U.S. Department of Housing and Urban Development (HUD)-approved housing counselor who can talk to you about your options today.

    Where can I get a mortgage?

    You can get a mortgage from a wide variety of lenders, including commercial banks, thrift institutions, mortgage loan companies, and credit unions. You can also find a mortgage loan through a broker, who does not lend you the money but instead finds a lender for you. Different lenders and brokers offer or arrange different types of loans. They generally are not required to offer you the best deal available. Always shop around to find the best loan for you.

    Where can I get money for a down payment?

    If you do not have cash for a down payment, there are several options available.

    • You can put off buying a home and start saving until you have enough money for a down payment.
    • Gifts from parents or others can also be used as down payments, as long as you can present a signed statement saying the money is a gift and not a third-party loan.
    • You can also consult with your financial advisor about withdrawing up to $10,000 from a traditional or Roth individual retirement account (IRA), without penalty. Generally, if you are under age 59 and a half, you would have to pay a 10 percent tax penalty on early withdrawals. However, if the money is used to buy, build, or rebuild a home, the penalty may be waived. Consult a trusted tax or financial advisor before making any withdrawal to see if this makes the most financial sense for you.
    • In some cases, you can borrow money to make a down payment. However, you should carefully consider that option since borrowing your down payment would increase your overall debt and your monthly payments.
    • Sometimes local non-profit or government organizations can offer you a second mortgage on special terms to replace a down payment. For eligible servicemembers or family members, VA loans do not require a down payment.

    TIP: Think twice before using retirement savings on your down payment. The biggest benefit of saving in an IRA is the tax-free growth of investment earnings. If you remove the principal to fund your down payment, you’ll have less money in the retirement account to earn tax-free interest. Your savings will not grow as quickly. Consult a trusted financial or tax advisor to see if this makes the most financial sense for you.

    Who do I contact to determine if I am eligible under the National Mortgage Servicing Settlement?

    For borrowers who lost their home to foreclosure between Jan. 1, 2008 and Dec. 31, 2011, a settlement administrator designated by the attorneys general will send claim forms to persons eligible for cash restitution.

    If you believe you are eligible for relief under this settlement but are concerned you will be difficult to locate, please contact your state Attorney General’s Office.

    For loan modifications and refinance options, borrowers may be contacted directly by one of the five participating mortgage servicers.

    Keeping in mind the timeline above, you may contact the banks directly if you need additional information.

    • Ally/GMAC: 800-766-4622
    • Bank of America: 877-488-7814
    • Citi: 866-272-4749
    • JPMorgan Chase: 866-372-6901
    • Wells Fargo: 800-288-3212

    Additional information is available at http://www.nationalmortgagesettlement.com.

    Why can’t I get any more money from my HELOC?

    Many lenders reserve the right to reduce the amount you can borrow from your HELOC or to suspend your ability to borrow any more money from it if:

    • The value of your home goes down significantly
    • The lender reasonably believes you may no longer be able to make your payments based on a material change in your financial circumstances
    • You default on a material provision of your agreement (for example, by moving out of the house or taking out another loan on your home that could affect your lender’s ability to be repaid)

    A lender can suspend or reduce your HELOC if the value of your home falls significantly, even if you have a good payment record. If your HELOC has been reduced or suspended, your lender must notify you in writing no later than three business days after the change and the notice should tell you why the lender took this action.

    Why did my monthly payment go up?

    There may be a few reasons that your monthly payment went up.

    First, check the type of loan you have. Some homeowners believe that they have a fixed-rate mortgage loan, when they really have an adjustable-rate or some other type of mortgage loan that can cause your payment to change. 

    Second, if you have set up an escrow account to pay for property taxes or homeowner’s insurance premiums, a monthly loan payment could go up because your property taxes or your homeowner’s insurance premiums went up. Your monthly payment includes the amount you have to pay into your escrow account, so if your premiums go up then your payment goes up.

    Third, you may have been assessed fees that affected your monthly payment. Check your mortgage statement or any correspondence you recently received from your lender or servicer.

    It is also possible that your servicer simply made a mistake. You can start by sending a letter to your servicer explaining why you think it made a mistake in calculating your loan payment.

    You can use this Qualified Written Request (QWR) as a sample to follow:

    Remember to:

    • Make sure that your QWR is sent to the address that the servicer uses for receiving QWRs
    • Send the QWR separate from your mortgage payment
    • Send the QWR certified mail, return receipt requested so you will have confirmation that your QWR arrived
    • Continue to make your scheduled mortgage payments

    Why should I choose a housing counselor who is HUD-approved?

    HUD-approved housing counselors are specially trained and work for agencies certified by the U.S. Department of Housing and Urban Development. That means you can have confidence that a HUD-approved housing counselor is well equipped to help you understand and evaluate your options. The services of HUD-approved housing counselors are provided at little or no cost to you. Foreclosure prevention counseling and counseling services for homeless persons are available free of charge through HUD's Housing Counseling Program. Call the CFPB at 1-855-411-CFPB (2372) to be connected to a HUD-approved housing counseling agency today.

    Will a lender getting a copy of my credit report affect my score?

    A single credit inquiry from a lender will have little impact on your credit score.

    Credit scoring models also take into account when a consumer is shopping for the best rate on a student loan, auto loan, or mortgage and do not penalize them for this comparison shopping.

    For these types of loans, scoring models generally count multiple inquiries as one inquiry if they occur within a reasonably short period of time.

    In general, credit inquiries for the same type of loan made within a 14-day period will be treated as no more than a single inquiry. For the most common credit scoring models, student loan, auto loan and mortgage-related inquiries that occur 30 days prior to scoring have no effect at all on your credit score. Outside this 30-day period, student loan, auto loan and mortgage-related inquiries that occur within any 45-day period are treated as a single inquiry.

    Will my children be able to keep my home after I die or move out permanently, if I have a reverse mortgage loan?

    Your reverse mortgage loan becomes due when the last surviving borrower dies or no longer lives in the home for 12 continuous months or more, including due to a hospitalization or moving into a nursing home. Your heirs must pay off the loan if they want to keep the home.

    Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. With an FHA-insured HECM loan, if the loan balance is more than your home is worth, your heirs can satisfy the loan by paying 95 percent of the value of your home, and the FHA insurance will cover the remaining loan balance.

    Proprietary (non-FHA insured) reverse mortgage loans may not have this feature, so make sure you understand the provisions carefully if you are considering a proprietary loan. Interest continues to be charged on the unpaid mortgage loan balance, so the mortgage loan should be repaid as soon as possible.

    If your heirs cannot afford to pay off the loan, they will need to sell the home in order to repay the loan.




    Copyright © 2013 by Mark McCracken , All Rights Reserved