This video and article explain which organizations are exempt from ability-to-repay laws when handling mortgages. While most lenders are required to assess a borrowers ability to repay a mortgage, a few types of agencies and organizations are not. These include: State Housing Finance Agencies Community Housing Development Organizations Community Development Financial Institutions Downpayment Assistance Providers In addition, some not-for-profit companies making relatively few home loans are exempt. Federal loans, like this made under, the Emergency Economic Stabilization Act, might be exempt. Mortgages laws are designed to help customers and lending institutions avoid risk. If you need to check on a lending institutions right to be exempted from Ability-to-Repay, inquire with the Consumer Financial Protection Bureau online, or by telephone at (855) 411-2372.

Debt-to-Income (DTI) is one of the key ratios lenders use to assess and approve loan applications. Determining your current financial obligations versus your existing earnings is one part of a lending institutions necessary evaluation of your capability to pay back a loan. Like the video states: financial obligations are existing monetary obligations; a vehicle payment is a financial obligation while a grocery expense is not. To compute your debt-to-income ratio, assemble your month-to-month financial obligation payments and divide them by your GROSS regular monthly earnings. (Gross earnings is the money you make BEFORE taxes and other reductions.) The Federally-established debt-to-income target is currently 43% for Qualified Mortgages, although some experts advise aiming for a more conservative figure — less than 36%. If your DTI is greater than the Federal guidelines, other loans might be available. These may also involve more documentation and data to establish your ability to repay. Rates for these are likely to be different from those offered for Qualified Mortgages. High debt-to-income ratio puts a property owner at higher threat of challenges to making regular monthly payments. Review your scenario and risks thoroughly if DTI is an obstacle.

If financial circumstances arent working, and you are falling behind on mortgage payments, hoping the lender wont notice isnt a solution. Talking with them about loss mitigation options is better. Lenders may be able to arrange a "workout package" to help get things back on track. Mortgage loans are often "sold"; the lender who is servicing the loan — the lender to whom you send checks — has the financial interest in your situation. Talk with that lender, not the original lender. If Fannie Mae or Freddie Mac — both government-sponsored enterprises involved in mortgage lending — have acquired your loan, there are Federal guidelines that they may apply to your situation. They are not there to deal directly with borrowers (you), but they may be able to work with the lender of record to determine the loss-mitigation guidelines that best fit your situation. Be vigilant about companies that "just want to help". Look out for: Financial counseling agencies with high fees; they may be charging for advice you can get for free. Equity Skimming — companies (or individuals) who offer to repay the mortgage or sell the property if you sign over the deed. And do not sign anything related to your home until you understand it thoroughly.

Can a mortgage be paid off ahead of schedule, and is it a good idea? Those are two separate questions. Most mortgages allow early payoff, but you should make sure you understand any payoff terms or restrictions in your specific loan. Some loans have prepayment charges. People sometimes accelerate payoff by sending extra money each month, or with an extra yearly payment. If you do this, indicate in writing that the excess funds should be applied to reducing principal. Record the payments and instructions! Whether paying off ahead of schedule is in your financial interest is a complicated calculation. If you have the ability to do it, and prepayment penalties arent an issue, you will reduce the interest you pay over time. But reducing a low-interest-rate loan by taking funds from higher-interest-rate investments may not be in your interest. (Note: Payment used against principal is not tax-deductible!) Your lender is one source of advice, but financial planning for you is not their core business. If you have the option, get advice from a financial planning professional when considering something like early payoff.

Equity is a key financial and legal term, but its not taught in school. Understanding the basic concept is very much in your long-term interest! (While equity is also used as a social term, this is just about the financial and legal sense of the word.) At heart, equity is "value owned." If you have equity in a home, or a company, you legally own some part of itscurrent value. If the value of the asset goes up, that part that you own becomes more valuable. In homes and mortgages, this idea of "the part you own" and "current value" are critical. As the example in this video shows, the value of the home changes separately from the size of the loan. You might own a $300K home today, and owe $200,000 — your equity is $100,000 in the current market. If the home is valued at $600K a few years later, and your loan principal hasnt changed (unlikely, but this is just an example), your equity would be worth $400K, and youd owe $200K. As the asset (property) value goes up, or the amount owed goes down, your equity grows. Generally speaking, assets like homes tend to go up in value over time. Equity becomes a financial tool for the owner; for example, as collateral. Because home equity is usually one of the biggest assets people accumulate, it should be treated carefully. Get financial advice before treating home equity like a giant piggy bank.

Federal regulations for mortgage loans require lenders to assess a home-buyer’s likelihood of paying back the loan over the years ahead. As a result, lenders are required to ask about a borrower’s current financial situation and financial history. Lender questions will cover employment, expenses, assets, income and of course credit history and credit rating. The key thing for the prospective home-buyer to understand is that lenders have to ask these questions and make this assessment. These ability-to-repay rules are built into loans that meet Qualified Mortgage guidelines. If you are shopping and comparing loans, keep track of which options are meet the guidelines to be Qualified.

Do high-tension power lines have long-term health impacts? Everybody uses electrical energy, and power lines are required to carry it. Rumors and notions about possible effects from high-tension power lines have been around for quite some time. However, as this video reveals, according to the HUD – the US Department of Housing & Urban Development— there are no conclusive research findings verifying that direct exposure to power lines leads to higher circumstances of illness or disease.

Make sure to check a few practical risks in the decision process for a new home, including: Natural disaster risks Is it in an earthquake-prone area? Is earthquake insurance available, and how much does it cost? Likewise, are hurricanes a risk? Tornadoes? How high does the property sit, and is there a risk of flood? (Watch the video on floods here on Video-Genius.) Are there hazardous materials in the area? Building Code compliance; the house should meet local codes. Local zoning and (if applicable) homeowner association rules can also play a big role in future changes. If you envision remodeling, making an addition, or other substantial changes, be sure you understand the regulations and permits that will be involved.

Wanting to buy a home and being financially ready to buy a home arent quite the same thing. Your financial situation will affect the process, so you are better off assessing your situation objectively yourself. Here are some of the key factors to know: Do you have the financial resources for the up-front costs of down payment and closing? Do your other debts and commitments leave enough cash flow for mortgage payments and the other costs of ownership? Do you have a steady source of income, such as a job? Is your employment history, particularly in the past few years, stable enough for a lender? Have you met previous debts and obligations on schedule? These questions will come up, and your answers will be verified in the loan process. If you are positive about most of these things, then you are probably in a good position to start looking in earnest.