An official website of the United States Government

Mortgages

Consumer advisory: Three steps you should take if you have a reverse mortgage

By

Reverse mortgages are a type of loan that allows homeowners, 62 and older, to borrow against the accrued equity in their homes. Reverse mortgages can help some older homeowners meet financial needs in retirement. Most reverse mortgages today are federally insured through the Federal Housing Authority’s (FHA) Home Equity Conversion Mortgage (HECM) program.

We’ve heard many complaints from consumers who have experienced problems with reverse mortgages. The most common reverse mortgage complaint is about difficulty with changing the loan terms and problems communicating with loan servicers. Some consumers, for example, express frustration about slow, inconsistent communication from their reverse mortgage loan servicer.

We’ve also heard from consumers regarding non-borrowing spouses who are facing the loss of their home after the borrowing spouse has died. Recent changes to the federal program that insures most reverse mortgages allows some non-borrowing spouses to remain in the home after the death of the borrower spouse for HECM loans originated after August 4, 2014. Since this change is not retroactive, spouses of reverse mortgage borrowers who took out their loan prior to August 4, 2014 could be more likely to face losing the home when the borrower dies.

3 things you or your loved ones should do if you have a reverse mortgage

1. Verify who is on the loan

If you took out a reverse mortgage with two borrowers, check with your reverse mortgage servicer to make sure its loan records are accurate. Call your servicer to find out what names are listed on your loan. They may be able to help you over the phone. See your reverse mortgage statement for the phone number, and ask them to send you this information in writing for your records. You can also write a letter requesting information.

2. If your reverse mortgage is in the name of only one spouse, make a plan for the non-borrowing spouse

If your reverse mortgage is in the name of only one spouse, contact your loan servicer to find out if the non-borrowing spouse may qualify for a repayment deferral. A repayment deferral allows a non-borrowing spouse to remain living in the home after the death of the borrowing spouse. If not, make a plan in the event the borrowing spouse dies first and the loan becomes due. If you or your spouse are not on the loan but believe that you should be, promptly seek legal advice.

If you have enough remaining equity in your home, you could consider taking out a new reverse mortgage with both spouses. You’ll have to pay loan fees again, however, for the new loan. If the non-borrowing spouse can’t pay off the reverse mortgage when the borrowing spouse passes away, he or she might consider a new traditional mortgage if they have the income and credit to qualify. Also consider other family members that would be willing to cosign on such a loan. Some surviving spouses may need to sell the home and make plans for where they will live after the home is sold. Contact a HUD-approved housing counselor counselor near you to explore your options.

3. Talk to your children and heirs – make a plan for any non-borrower family members living in the home

Make sure your adult children or any family members living in the home know what to expect when your reverse mortgage comes due. If they wish to keep the home, contact your reverse mortgage company for written information that explains their options. Discuss this information with your family and follow up with the reverse mortgage company for anything you don’t understand.

Have a problem with your reverse mortgage?

If you’re having a problem with your reverse mortgage or having problems getting through to your mortgage servicer, you can submit a complaint online or by calling (855) 411-2372 or TTY/TDD (855) 729- 2372. We’ll forward your complaint to the company and work to get you a response within 15 days.

For more information about how reverse mortgages works and questions to ask, read our guide to reverse mortgages for older consumers and their families.

Check out Ask CFPB to learn more about reverse mortgages.

7 factors that determine your mortgage interest rate

By

If you’re like most people, you want to get the lowest interest rate that you can find on your mortgage loan. But how is your interest rate determined? That can be difficult to figure out for even the savviest of mortgage shoppers.

Your lender knows how your interest rate gets determined, and we think you should, too. That’s why we’ve created a new interactive tool that lets you explore the factors that affect your interest rate and see what rates you can expect.

Armed with information, you can have confident conversations with lenders and ask questions to make sure you get a good deal. Here are seven key factors that affect your interest rate that you should know:

1. Credit score

Your credit score is a number that lenders use to help predict how reliable you’ll be in paying off your loan. Your credit score is calculated from your credit report, which shows all your loans and credit cards and your payment history on each one. In general, if you have a higher credit score, you’ll be able to get a lower interest rate. You can use our tool to explore how your credit score impacts the rates available.

Before you start mortgage shopping, get your credit report. Check for errors, and make sure to get them fixed. Examine your debts, and see if there are any you can pay down to improve your score. Learn more about how to raise your score.

Credit scoring is complicated—in fact, you have many credit scores, not just one. You can learn more about how mortgage lenders evaluate your credit history and use credit scores.

It’s a good idea to try to get a sense of your credit score range before you start mortgage shopping. Once you have an idea of your credit score range, put it into our tool to get more accurate rates.

2. Home location

Many lenders have slightly different pricing depending on what state you live in, so to get the most accurate rates using our tool, you’ll need to put in your state. If you live in a rural area, you can use our tool to get a sense of rates for your situation, but you’ll want to shop around with local lenders as well. Making a loan in a rural area can be more complicated, so large lenders may not serve that area.

3. Home price and loan amount

Your home price minus your down payment is the amount you’ll have to borrow for your mortgage loan. Typically, you’ll pay a higher interest rate on that loan if you’re taking out a particularly small or particularly large loan.

If you’ve already started shopping for homes, you may have an idea of the price range of the home you hope to buy. If you’re just getting started, real estate websites can help you get a sense of typical prices in the neighborhoods you’re interested in.

4. Down payment

In general, a higher down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can put 20 percent or more down, do it—you’ll usually get a lower interest rate.

If you can’t afford 20 percent down, experiment to see how lower amounts affect your rate.

5. Loan term

The term of your loan is how long you have to repay the loan. In general, shorter term loans have lower interest rates and lower overall costs, but higher monthly payments. Learn more about your loan term, and then try out different choices with our tool to see how your term affects your rate and interest costs.

6. Interest rate type

Interest rates come in two basic types: fixed and adjustable. Fixed interest rates don’t change over time. Adjustable rates have an initial fixed period, after which they go up or down based on the market.

In general, you can get a lower initial interest rate with an adjustable-rate loan, but that rate might increase significantly later on. Learn more about interest rate types, and then use the tool to see how this choice affects interest rates.

7. Loan type

There are several broad categories of loans, known as conventional, FHA, and VA loans. Rates can be significantly different depending on what loan type you choose. You can learn more about the different loan types in our Owning a Home loan options guide.

Now you know

That’s it—know these seven factors and you’ll be well on your way to getting a great interest rate for your situation. And just remember:

  • You don’t need to have all seven of these factors decided before experimenting in our tool.
  • As you consider your budget and learn more about your options, come back often. The more you know, the more accurate the rates will be.
  • As you start talking to lenders, compare their offers to the rates in the tool to see if you are getting a good deal.

Now go forth and find a great mortgage rate!

5 reasons to check out our Owning a Home tools now

By

Buying a home and taking on a mortgage is a big financial decision, one most of us will make only a few times in our lives. No matter where you are on your journey, whether you’re currently looking for a home, shopping for a mortgage, or just curious for your future, we have tools and information to help you confidently make good decisions to reach your goals.

This week, we’re launching our latest effort to help you navigate the market, ask the questions, and take the steps that will help you to find the mortgage that’s right for you. We’re calling it Owning a Home.

We’re committed to making it easier for consumers to shop for and get a good mortgage. Here are five ways that Owning a Home can help you find the best mortgage for your situation:

1. Owning a Home helps you know what to expect.

Shopping for a mortgage isn’t like shopping for a new toaster. You can’t easily go online and double check to make sure you’re getting the best price (or, in the case of mortgages, the best interest rate). Owning a Home lets you see real data on what current interest rates look like for your situation.

With a simple visualization, you can tell what kind of rates real lenders are offering to borrowers in your situation, and quickly understand what a good deal looks like for you. Armed with this information, you can plan how much to spend on a new home and know what to expect when you talk to lenders.

2. Owning a Home helps you understand your loan options.

It might seem like real estate agents, bankers, and mortgage brokers speak a foreign language. They use words like “ARM” and “principal” as if you should already know them, and it can be frustrating. Owning a Home demystifies this jargon, so you can have conversations with your lender confidently. We help you understand how the choices you make about your loan will impact your costs and risks.

3. Owning a Home lets you imagine new options.

You can explore different options to see which might be the best fit for you. You can see the factors lenders consider when determining your interest rate, like down payment and credit score. Because the tool is interactive, you can start to see how even small changes affect your interest rate. Considering saving up for a higher down payment before buying? See how different down payment amounts affect your interest rate. Credit score lower than you like? See how your rate could be lower with a higher credit score, and consider if it’s worth it for you to improve your credit before buying a home.

4. Owning a Home is there for you from start to closing.

Use these tools from the very start of your home buying process through to closing. Closing is the time when you dot the i’s and cross the t’s— it’s when you legally commit to your mortgage loan. To help you make sure you don’t miss anything important, we’ve created a detailed checklist and an easy-to-read guide to the forms you’ll be signing during closing.

5. Owning a Home helps you make smart choices to serve your own goals.

All of the tools and resources available on Owning a Home aim to give you the information you need to feel more confident throughout the entire home buying process. Our tools are intended to help you decide what kind of loan you want to get, find a good deal from a mortgage lender, and close like a pro. We’ll help you spot red flags and ask the right questions.

Safer mortgage markets for you

From our very first day as an agency, we’ve been working hard to improve your experience when it comes to purchasing and paying for your home. We developed new forms that make it easier to compare your loan options, using your input to guide our decisions. We’ve also been working to make the market safer, cleaning up bad practices and requiring good ones. In addition, we’ve worked to get responses to your mortgage complaints, and we’ve explored ways to make the closing process less painful.

Nearly half of mortgage borrowers don’t shop around when they buy a home

By

47 percent of homebuyers do not compare lendersBuying a home is a big purchase, but it’s just that: a purchase. When it comes to spending money on our daily expenses, we have lots of options to help us find the best deal possible. Take, for example, digital gadgets. To get a good deal you can search for sales, find coupon codes, and research whether it’s less expensive to buy something from a big box retailer or on the manufacturer’s website.

We shop to find the best price for laptops or appliances, but a report of recent mortgage borrowers found that almost half of us don’t shop around for a mortgage when we buy a home.

Failing to shop for a mortgage could cost you. Consumers who consider interest rates offered by multiple lenders or brokers may see substantial differences in the rates. For example, our research showed that a borrower taking out a 30-year fixed rate conventional loan could get rates that vary by more than half a percent. Getting an interest rate of 4.0% instead of 4.5% translates into approximately $60 savings per month. Over the first five years, you would save about $3,500 in mortgage payments. In addition, the lower interest rate means that you’d pay off an additional $1,400 in principal in the first five years, even while making lower payments.

The survey of 2013 mortgage borrowers also found that modern mortgage borrowers:

  • Often fail to shop: Almost half of borrowers seriously consider only a single lender or broker before deciding where to apply.
  • Apply to only one lender or broker: Seventy-seven percent of borrowers only end up applying with a single lender or broker, instead of filling out applications with multiple lenders or brokers to see which can offer the best deal.
  • Rely on information from people with something to sell: Lenders and brokers were the most popular source for information about mortgages, with 70 percent of mortgage borrowers reporting that they used them “a lot” as a source of information. Thirty percent of borrowers say they relied heavily on their real estate agent for mortgage information. While lenders, brokers, and real estate agents can be informative, they also have a stake in the transaction. The report found many fewer, 20 to 41 percent of borrowers, get a lot of their information from outside sources such as websites, financial and housing counselors, or friends, relatives or coworkers.
  • Shop more if they know more: Borrowers who were confident about their knowledge of available interest rates were almost twice as likely to shop as consumers who reported being unfamiliar with available interest rates.

We believe that mortgage borrowers should be shopping around. We’ve created Owning a Home, an interactive, online set of resources and tools designed to help borrowers approach the mortgage shopping process, with more information.

Owning a Home sets out to help you feel comfortable shopping in the mortgage market. These unbiased tools and resources aim to inform and empower you when you are shopping for a mortgage. The tools take you from the very start of the home buying process through to the closing table. At every step, Owning a Home provides information and questions to ask. The tools include:

  • Guide to loan options: A primer on the loans available to help you finance your home. In this resource, you’ll find information on the length or term of loans, whether a loan is fixed or adjustable, the different loan types available, including FHA and VA loans.
  • Tool to see what interest rates are offered to people in your situation: A dynamic tool that lets you input your information, like credit score and down payment, to see what interest rates people with similar financial situations have been offered. You can play around to see how different factors affect the rates.
  • Guide to closing documents: A document that explains the important closing forms, so you know what information is on the forms, and where to find it.
  • Closing checklist: Closing is when you finalize your mortgage. You need to go into the process prepared and ready to enter into your contract. Our checklist helps you to realize what you need to do, and gets you ready for closing, one step at a time.

Our survey will continue each year, and we look forward to hearing more from borrowers to see if our Owning a Home tools change the way the modern mortgage borrower approaches the mortgage market.

Check out our report for more in-depth research on consumers’ responses. Then check out Owning a Home to help you navigate the market, ask the questions, and take the steps that will help you find the mortgage that’s right for you.

Infographic: shopping for a mortgage can really pay off. 47 percent of homebuyers don't compare lenders. Visiting just three lenders could save you thousands. You can put that savings to use. We're here to help you with the home buying process. Our Owning a Home tools show you the interest rates that others with a similar financial background are being offered, help you understand loan options, and ease the closing process so you can make smarter decisions about your mortgage. Visit http://consumerfinance.gov/owning-a-home

Proposed changes to our Mortgage Servicing Rules: New protections for surviving family members and other homeowners

By

Today, we’re proposing changes to our Mortgage Servicing Rules, which took effect on January 10, 2014. These rules provide important protections for consumers with mortgages, including:

  • Requiring mortgage servicers (people who manage your mortgage loan account) to provide you with periodic mortgage statements or coupon books that give you important information about your mortgage.
  • Requiring servicers to respond quickly to written inquiries seeking information or requesting that they resolve potential errors about your mortgage.
  • Requiring servicers to reach out to you and send written information describing how to avoid foreclosure if you fall behind on your mortgage payments.
  • Requiring servicers to respond quickly to help you complete your application for loss mitigation options to avoid foreclosure. (Here’s more information about loss mitigation options.)

Since the Mortgage Servicing Rules went into effect, we’ve spent a lot of time talking to consumer advocacy groups, housing counselors, mortgage servicers, and trade associations, to better understand how the rules are working and whether we should make any changes to them. As a result, we’re now proposing some changes to the Mortgage Servicing Rules. The changes are intended to smooth the path for companies to better protect consumers and comply with the CFPB’s rules.

Expanded Protections for Surviving Family Members and Other Homeowners

Some of the most significant proposed changes would expand protections for people who inherit or otherwise receive property from a spouse, parent, or other relative when the mortgage has not been paid off. These homeowners include people who get the property after a loved one dies or in a divorce. They are often called “successors in interest.”

Our proposals regarding these homeowners would:

  • Provide a process for these homeowners to have their interest in the property reviewed and confirmed by the servicer; and
  • Give them the same rights to get information and correct mistakes about the mortgage loan and apply for loss mitigation options as other borrowers have under our rules, once the servicer reviews and confirms their interest in the property.

Loss mitigation applications

We’re proposing several changes to how servicers handle loss mitigation applications (that is, applications for loss mitigation options), including making your mortgage servicer tell you in writing when your loss mitigation application is complete, requiring servicers to gather information from third parties promptly to avoid delays, and clarifying protections for borrowers during servicing transfers and in the face of a foreclosure sale. We are also proposing that servicers would have to give you another opportunity to apply for a loan modification if, for example, you get a loan modification and bring the loan current, but then you fall behind again.

Get involved

Check out the proposed rule and send us your comments. We’ll update this post soon with a link to submit formal comments.

Social Security disability income shouldn’t mean you don’t qualify for a mortgage

By

More than 15 million people receive Social Security disability income every year. For those relying on this income, qualifying for a mortgage can unfortunately become a challenge when lenders ask for proof of how long they will receive their benefits.

Today, we’re reminding lenders that placing unnecessary documentation requirements on recipients of Social Security disability income, including disabled veterans, may raise fair lending concerns. Following the guidelines and standards noted in the bulletin may help lenders comply with fair lending laws.

Difficult to prove your income

Generally, when you apply for a mortgage, you must show to mortgage lenders that you have a stable income. However, those who depend on Social Security disability income usually don’t have any documentation saying how long this income will continue. The Social Security Administration (SSA) normally only provides proof that consumers are currently receiving benefits.

Unfortunately, some consumers have reported that loan officers have asked them for a specific description of their disabilities or a statement from a doctor to prove that their Social Security disability income is likely to continue.

What our rules require

To verify income for Qualified Mortgage debt-to-income ratios, our rules require lenders to look at whether the SSA benefit verification letter or equivalent document includes a defined expiration date for payments. Unless the SSA letter specifically states that benefits will expire within three years of loan origination, lenders should treat the benefits as likely to continue.

Similar standards

The Department of Housing and Urban Development (HUD) has a similar standard for documenting income for FHA-insured mortgages, and emphasizes that a lender shouldn’t ask a consumer for documentation or about the nature of his or her disability under any circumstances.

The Department of Veterans Affairs (VA) allows lenders to use Social Security disability income as qualifying income for VA-guaranteed mortgages and emphasizes that it’s not necessary to obtain a statement from the consumer’s physician about how long a medical condition will last.

Fannie Mae and Freddie Mac have issued similar guidelines for loans that are eligible for their purchase, allowing consumers to use Social Security disability benefits as qualifying income for a mortgage.

Everyone deserves to qualify based on their income

Persons with disabilities should be able to qualify for mortgages they can afford based on their stable income, including from Social Security disability income. And anyone with disabilities, including disabled servicemembers, should not be prevented or hindered from buying a home by unnecessary barriers or requirements.

Together, these standards and guidelines should help lenders avoid unnecessary documentation requests and help individuals who receive Social Security disability income receive fair and equal access to credit.

Submit a complaint

If you are having an issue with a financial product or service, you can submit a complaint online or call (855) 411-CFPB. We can assist people in over 180 languages. We’ll forward your issue to the company, give you a tracking number, and keep you updated on the status of your complaint.