Mortgage Payment Laws
A mortgage payment consists of 2 parts. One part goes to make payment for the principal amount. The other goes to make payment for the cost of borrowing the money (interest). In majority of the cases, homeowners have yet another part in mortgage payment and that is the amount which is put into the escrow account maintained by creditors. The escrow account is usually maintained for making payments related to property taxes, hazard insurance etc.
There are mortgage payment laws, a couple of rules which govern mortgage payment. Some of the mortgage payment laws are given below:
Maintain the debt-to-income ratio
The thumb rule is that the front-end ratio should be 33%. The front end ratio consists of payment towards principal amount, interest, property taxes, hazard insurance etc. The back end-ratio should not be more than 38%. It includes payment related to child support, alimony, legal judgments etc. In other words, the debt-to-income ratio should not exceed 33/38.
Know your rights pertaining to foreclosure
In case you miss a single payment, a lender is entitled to send you a notice of default within 90 days from the day you have missed the payment. There are times when the lenders send the notice much earlier to facilitate foreclosure if a consumer is not aware of it. In the event the loan is not paid within 90 days from the day foreclosure has been filed, the lender sends a notice of sale.
Mortgage servicer
A mortgage servicer collects your monthly payments and credits it to your account. He is also responsible for managing your escrow account in case you have one. You may be of the opinion that during the tenure of the loan, a single mortgage servicer takes the responsibility. However, there may be a transfer of servicer. When this happens there are certain responsibilities that the old as well as the new mortgage servicer have towards you.
The old mortgage servicer should notify you 15 days prior to the effective transfer date. The effective date is usually the date when the first mortgage payment has to be made at the new servicer’s address. The new mortgage servicer is also required to inform you within 15 days after the transfer takes place.
Getting an alternative repayment plan
A lender will not agree to work out a repayment plan unless you are behind on payments for at least 2 or 3 months. This can also be regarded as one of the mortgage payment laws.
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