A lot can happen when things go hay wire in your life and if it something that affects millions like the pandemic, then it is worth a while to go over your financial situation. One of the financial commitments that you will make if you decide to become a home owner and with it complexity is definitely worth looking into even if you are making regular payments.
I want to explore certain situations that I personally came across or heard from friends and family who told me about it after they were affected.
NOTE 1: I am not an expert and this post is solely based on my personal experience. So consult an expert , whether it is your dog, or someone else when making taking big decisions.
NOTE 2: I will also post a government website link for the US so you can find all the resources if you are unable to pay your mortgage at the end of the post under Useful Resources.
Refinancing:
Have you heard in the news that the interest rates are low to refinance? It may be true but when you do refinance, make sure you know where you loan is at, where it will go, how long does it take for the loan to get transferred.
Sometimes, the loan may be transferred to an institution temporarily before it is sold again withing a month to another buyer of your loan. So in this case, make sure you do not get all excited and set up auto pay. Instead send a paper check or pay by phone.
New Homeowners or existing homeowners :
While you may think not much will happen once you have a relationship with your loan service company, there could be some potential changes that could affect you. Such as:
- Incurring fees if paying off too early. Make sure you understand what type of loan you have and the conditions of your mortgage. This should be in the paper work when you closed your loan.
- If you are in Mortgage forbearance plan with your mortgage company, then you may not have made payments for the agreed duration and your due date may be approaching. Also your may have sold off your mortgage and you may have missed their letter. Then you realize, you are now past due at another mortgage company.
Paying Efficiently:
Not all mortgage companies are same and not all mortgage loans are the same. Some will let you make payments at no cost online, over the phone or by mail. Some charge you a fees for paying manually every month or paying over phone. Make sure you understand how these charges are assessed.
The Escrow Fail
This one is more common than you think, when a mortgage company decides that you need an escrow because you are a first time home buyer or you paid just enough down payment to qualify for a lone or you decided that you needed to escrow and let the mortgage company pay for taxes, insurance and other fees. While you are making your regular payments, at the start of the next financial period, your mortgage company has to do a check on your monthly payment and escrow analysis to make sure they are not taking too much or too less from you. This can result in payment increase or decrease. This can be a pain as sometimes they will not perform the escrow analysis you find out after 3 years of making payments that you now owe $500 extra every payment. Yes, this has happened and to avoid this escrow fail, when you sign up for a loan, make sure you calculate how much you pay for insurance, taxes, principal and interest and if the monthly payment does not match your expectation, get on a call with your mortgage company.
Useful Resources:
Understand your Mortgage payment:
Investopedia has a really good article that I refer to often. https://www.investopedia.com/mortgage/mortgage-rates/payment-structure/
Pay off your mortgage faster:
This one is a handy simple calculator to see how much you currently pay, how much faster can you pay and save all that interest $$$
Aid when you need it:
If you are not able to pay your mortgage, go to https://www.consumerfinance.gov/about-us/blog/guide-coronavirus-mortgage-relief-options/ and find options that will help you to utilize the CARES act.
Look up Federally backed loans:
Conventional loans purchased or securitized by Fannie Mae and Freddie Mac (combined, GSEs)
To find out if your loan is owned by one of the GSEs, please visit the following webpages:
- Fannie Mae Loan Lookup: www.knowyouroptions.com/loanlookup
- Freddie Mac Loan Lookup: ww3.freddiemac.com/loanlookup
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