The U.S. economy is slowly recovering from the effects of the coronavirus pandemic, yet millions of people still face significant financial constraints, including the possibility of losing their homes.
Fortunately, President Joe Biden has enacted a mortgage relief stimulus in 2022 to provide states with billions of dollars through his COVID relief package for disbursement to homeowners struggling to pay their mortgages while paying for other housing costs.
States that have applied for funds are preparing to distribute them. If you’re having trouble paying your mortgage and your debt is mounting, here’s your chance to seek help.
Read on to understand how Biden’s mortgage stimulus works, who qualifies, and how you can reduce your mortgage payments even if you don’t qualify for these relief programs.
What is Biden’s Mortgage Stimulus and How Do You Qualify?
The majority of ongoing mortgage relief programs, including the congress homeowner stimulus, are extensions of the mortgage stimulus program in 2020, but what is the 2020 mortgage stimulus program?
Approved in March 2020, the CARES Act provided the first substantial aid to people who were having trouble paying their mortgages due to income loss or health challenges. Mortgage aid programs were included in the stimulus package for a year, and have been extended by the Biden’s administration.
Biden’s $1.9 trillion pandemic relief package includes recent stimulus checks of up to $1,400 and more than $10 billion in direct financial support to help homeowners pay not just mortgages, but taxes, electricity, insurance, and homeowners association dues.
According to the National Council of State housing agencies, housing assistance — formerly known as the Homeowner Assistance Fund — is distributed to states based on a formula that takes into account job losses, past-due mortgage payments, and foreclosures.
You’re eligible for the funds if you own the house you’re currently occupying and have a loan balance below a threshold set by the government-sponsored mortgage giants that buy or guarantee the majority of home loans in the United States (Fannie Mae and Freddie Mac). In most regions in the United States, the loan maximum for 2021 is $548,250.
The funds will be disbursed to low-income debtors through several state housing agencies, and at least 60 percent of the state funds must go to homeowners whose earnings don’t exceed the local or national median income.
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States to Begin Disbursement
These funds will be distributed by the US Treasury Department to states and must be spent before September 30, 2025. The deadline for states to request a share of the $10 billion was April 25, and it’s unclear how many chose to participate.
Several states that requested funds are pushing forward with preparations to distribute the funds to homeowners.
Homeowners with federally backed loans can use the government’s forbearance program to put their payments on hold for up to 18 months. In addition, Biden has prolonged a federal foreclosure moratorium until June.
Another effort to assist came when the Consumer Financial Protection Bureau recommended a series of rule modifications targeted at reducing needless foreclosures once government safeguards expire.
Congress Mortgage Relief Programs
As part of the CARES Act, the congress mortgage relief bill was enacted to help borrowers struggling to pay their mortgages, especially by extending the forbearance period of these loans.
Many other aid programs have been extended until 2022 to help those still in need. However, there’s currently no new congress mortgage relief program, so consider jumping in on the ongoing ones before they conclude.
How to Reduce Your Mortgage Payments
If you’re not eligible for the ongoing Biden’s mortgage stimulus or you’re seeking other means to reduce your mortgage payments, then worry not. Here are several strategies you can adopt to help reduce your financial strain.
The 30-year mortgage rate is currently 3.04 percent, while the 15-year mortgage rate is 2.35 percent. So, if you need to cut your monthly payments, consider refinancing your home loan to save money. Homeowners refinance to reduce their mortgage interest rate, thus lowering their monthly mortgage payments.
Lowering these rates can also save you thousands of dollars over the course of the loan. If you’ve had your current mortgage for more than two years, or if your financial situation has improved since you purchased your house, your chances of qualifying for a lower rate are higher.
Extending Your Loan Duration
Another alternative is to refinance and extend your loan’s duration, which is the period you have to pay it off. The benefit here is that you will cut your monthly payment, providing you with more monthly cash flow.
Even if you already have a cheap interest rate, you can still apply this strategy. Keep in mind that you may eventually pay more in total interest. However, if your primary aim is to have a smaller monthly mortgage payment, this may not be an issue.
Request a Tax Reassessment
Homeowners overlook the importance of taxes in determining how much money goes into escrow. Examine your yearly property appraisal to see if it accurately reflects your property’s value.
Visit the property assessor’s website to evaluate the values allocated to comparable properties in your area. If the properties are evaluated for less or recent sales indicate a reduction in property values, you can appeal your assessment.
Note that your property’s assessed value isn’t the same as its market-appraised value. The assessed value is determined independently by the tax assessor. You can submit a complaint with your local government and seek a hearing with your state’s Board of Equalization. If you’re refused a reassessment of your house, you have proof that the assessment is exaggerated.
Reduce Homeowners’ Insurance Premiums
To protect their loan, mortgage lenders need you to keep replacement-value insurance on your house. However, several insurance firms are prepared to offer a policy, and some charge less for comparable coverage than others. Check with different insurers regularly to ensure you’re getting the best offer, and if you’re not, consider rate shopping to save money on your homeowners’ insurance.
Make Your House Work for You
Why not rent out that extra space in your house to a tenant? This strategy can generate additional income to cover a mortgage and other expenses. You can also run a small business or even accommodate a home office in that extra space. That way, the house is paying for itself.
Move to a Less Expensive Home
People occasionally end up with homes they can’t afford. You can also consider selling your home if you can’t pay your mortgage and other options aren’t working.
Staying in a home you can’t afford may cause heartbreak, restless nights, and default, which is the worst-case scenario for your finances. After selling, you can either use the proceeds to purchase a less expensive home or invest the funds and rent a place. If you hire an agency to sell your home, remember to account for a real estate commission.
With the effects of the COVID-19 pandemic still lingering, numerous homeowners still struggle to pay their mortgages. However, Biden’s mortgage stimulus and other ongoing relief programs are present to help these individuals.
Once you’re eligible, these programs can help lift a heavy load off your shoulders so you can concentrate on using the finances for other expenses.