There are so many options out there is you are struggling with paying your mortgage:

1. Loan Modification

I have written many blog posts about loan modifications and there is a ton of information out there about them. This is an option for you whether or not you are qualified under the MHA. Most banks have their own internal loan modification program, if you do not qualify for the MHA.

2. Refinance

Qualifying for a refinance is your biggest obstacle here. If your house has some equity in it, you want to talk to a licensed mortgage broker or your bank about the possibility of refinancing. Refinancing does have costs associated with it; however, with interest rates as low as they are, the costs may be worth it. You will also need to have a good credit score (620 or higher).

3. Streamlined Refinance

A Streamlined Refinance is a refinance of your existing loan with the same lender and the costs are significantly lower than in a traditional refinance.

4. Deed-in-Lieu of Foreclosure

If you are already behind on your mortgage, a deed-in-lieu of foreclosure may be an option. Under this option, you will need to contact your bank and determine if they are willing to take back the house.  You will turn over the deed back to them. The banks are sometimes willing to do this to avoid the foreclosure process and the fees that are associated with it. There is some negotiating that will have to be done here. You want to make sure that the bank releases you from the mortgage and any deficiencies. You do not want to turn your house back over to the bank to then find out that you still owe the balance of the mortgage.

5. Short Sale

A Short Sale is where you sell your house for less than you owe on it, pending approval of the bank. You will need an attorney to negotiate the short sale for you but here, there is also the opportunity to make sure that you do not owe anything to the bank. Your attorney should be able to help you negotiate this and make sure that any deficiencies in the sale price and mortgage amount are “wiped” away.

6. Cash for Keys

Some banks are now offering a program called “Cash For Keys.” This is a program where the bank pays you to move out of your home.  You are released from the mortgage and most of the time, any deficiencies between what you owe on the mortgage and what the bank sells the house for. Once again, all terms of this need to be negotiated before it is finalized.

There are so many options if you are in danger of losing your home.  Don’t just walk away. There are scams out there so you need to be careful, but you do have options.

Related Posts

1. Should I Stop Paying My Mortgage?

2. Streamlined Refinance As An Alternative to A Loan Modification

Are people just better off walking away and starting again?

This discussion began to get heated in October, when there was an article published on the Wall Street Journal blog written by an economics professor that stated that homewoners should walk away from their mortgages, in certain circumstances.  In “It’s OK to Walk Away, A Law Professor Argues“, there is an argument that walking away from your mortgage is more of an emotional or moral issue than a financial one. People feel as though they have a moral or ethical responsibility to stay in a home they can no longer afford or is “underwater.”

Today there was another article published by WalletPop, called “Is It Immoral To Walk Away From An Upside Down Mortgage?”, which discusses this topic one more time. The author discusses the issue as not so much a financial one but more of a moral and ethical decision. Homeowners need to accept the fact that they cannot afford the house any longer and make a decision to walk away.

There are many arguments on both sides of the argument. There is no right answer for everyone. There is no one who can make a decision of this magnitude for anyone else. There are definite financial consequences if you walk away from your mortgage. There will be severe damage to your credit score and your financial history. It will make it difficult to get credit or even rent an apartment for some time. However, there may be worse financial consequences if that homeowner stays in the house and lives off their credit cards to get by every month and ends up in foreclosure anyway.

The moral and ethical consequences can also be severe. People associate their homes with their families and their self-worth. They think that walking away means they are a failure. They have failed their families and themselves. However, walking away may help them save their families.

Before anyone walks away from a mortgage, there are many different factors that need to be considered. If you feel as though this may be something you are considering, you need to talk to a professional, either an attorney or a financial advisor, who may be able to help you make the right decision.

I know that this is a topic that people feel very strongly about.  What do you think?

When refinancing your home, remember that it is your home. Make sure that refinancing is something you are doing that will have a positive effect on your finances. Make sure that you are doing it because you are sure that it will help you in the long run. Make sure that you are not doing it because “everyone else is.”

It’s your home and your money; make it your decision.

Real Estate Brokers have a rather strange job and their entire job is an exercise in conflicts of interest. Brokers almost always represent the Seller and it is very rare that a buyer’s broker is used except in very limited circumstances. Brokers are obligated to get the best price for a home that they possible can since they work for the seller. They are rewarded for this because their pay is directly related to the purchase price. In order for a broker to make money they must sell homes,which means they must also keep buyers happy and negotiate on their behalf as well. Brokers also have their own listings where they will not have to split the fee with anyone else and many will attempt to steer you in that direction. Be wary as there may be many more homes and some may be better suited to your desires than what you are being shown.

If you determine that you need to use a broker to find your home , there a few tips that will help you get the best results possible:

1. Don’t sign anything. Brokers will sometimes attempt to get you to sign an exclusive contract whereby you are bound to use only that broker.

2. Use multiple brokers as each broker has their own area where they are prevalent. A broker experienced in one town may have little or no knowledge in another town, even if they are geographically close.

3. See houses in day trips. Always see a house in the day time, not at dusk or night as it is too easy to miss things that way. Also see multiple houses at a time. If you are going to see a house with a broker, there is no reason not to see three, four or ten houses on the same excursion.

4. Don’t be bullied. If you want a house with at least three bedrooms, then do not allow the broker to take you to see houses with two bedrooms.  If your budget is $300,000, then there is no reason to be looking at houses in the $400,000 dollar range. A little more is ok, as price is always negotiable, but there is no reason to be looking way out of your price range. These little things turns into a waste of time and become very frustrating.

Related Posts:

1. 7 Days To Owning A Home: Day 1 – Your Credit

2. 7 Days To Owning A Home: Day 2 – Financials

3. 7 Days To Owning A Home: Day 3 – Where To Live?

4. 7 Days To Owning A Home: Day 4 – Where Do I Find My Dream Home?

There are a ton of available outlets to help you find your home.

1. Realtor Websites

The first place to begin looking for a home is the Internet. Websites upon website offer houses for sale in every community across the globe and any house available for purchase will be there. All sites are not created equal however, and there are certain things you should be wary of when beginning your search especially if you are not familiar with real estate purchases. Many websites that are created specifically for a certain realtor such as Century 21, Prudential Real Estate, Re-Max, Coach, and all the others will list their exclusive listings before general listings. These listings are exclusive to the specific realtor. That means that the realtor will not have to split their commission with another realtor and therefore make more money on the sale of these homes. So obviously, they want to sell them first. Many listing agreements have an exclusivity clause in them whereby the realtor gets to list them exclusively for a short time before they are obligated to get other Realtors and general listings involved. The use of these websites is an invaluable tool but be mindful that what you are seeing are listings new to the market and not yet price reduced.

2. MLS (Multiple Listing Service)

Almost every region has a multiple listing service where a realtor can list a home for other realtors and the general public. In lower NY State, you should use MLSli.com, which stands for Multiple Listing Service Long Island. Although the title seems to limit the service to Long Island, many listings are in New York City and the surrounding areas. MLS services are a great resource as you can see listings from every realtor and from many for sale by owner listings as well. This side by side view of the market in a current area will help you to see where the good deals are and the average value assigned to properties of different types in certain areas. You will also be able to contact realtors directly to schedule viewings and open houses are listed. The MLS website has additional tools on it that can be very helpful such as mortgage calculators, income calculators, and tools to search houses that were recently sold in the area to give you an idea of an acceptable price. Remember asking price for a house is rarely what is paid, everything is negotiable, especially in the current housing market.

3. Open Houses

Set aside a few weekend days and travel to the places you think you want to live. This is supposed to be fun, but remember what you are there for. While it is exciting to look at a potential new home you must do so with a critical eye. Remember the house was prepared for you and in many instances even staged by a professional designer to give off a certain aura. Use a critical eye and think about those possessions you have and don’t want to discard, ask yourself, “Will my couch fit here?”, “Will my TV look right there?”, and “Will our bed fit in this room?”. Remember once you buy it, it is yours and if it is not right you may not be happy.

Related Posts:

1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Credit

3. 7 Days To Owning A Home: Day 2 – Financials

4. 7 Days To Owning A Home: Day 3 – Where To Live?

There are a number of factors to consider when choosing where you want to live:

1. School District

To many home buyers this is the single most important aspect of their where new home will be located. The school district must be one of the best! This is true if you have or are planning to have children. If you are single or simply not planning to be parents, then school district loses its appeal. However, you must realize that school district adds tremedous value to your home should you choose to sell. Full day kindergarden is a tremedous seller for a home and adds value. It is a consideration often overlooked by both buyers and sellers but it is very important. If you live on Long Island or in the Five Boroughs of New York City, check out the school district information on Multiple Listing Service for Long Island (mlsli.com).

2. Town and community

Depending on your social, gender, religious and racial makeup some places may be more appealing than others. You may wish to be in an area with a high Jewish, Catholic, Gay, Indian, Italian or African American population. You may like the artsy and whimsy style of small towns. Whatever your style and preference, remeber that your choices now will affect the value of the home later when it comes time to sell. Check out the Neighborhood Info section of mlsli.com.  You can find information about all of the communities on Long Island by entering in the zip code. 

3. Proximity to shopping, highways, parks, other towns, etc.

Make sure that you have access to those things that are important to you within a reasonable driving distance. Although the social makeup of a particular small town may be exactly what you are looking for, if it takes forty five minutes to get to the nearest supermarket or the beach is too far away, you may be miserable. You may love living in a city, but taking your child to the park is not an option. 

4. Work or family.

For some people, a shorter commute to work is more important than a shorter commute to see their families. Determine which is more important to you and look at homes in those areas.

Remember that determining where you are going to live is a personal decision and you need to do your research. Only you can decide what matters most to you.

Related Posts:

1. 7 Days To Owning A Home

2. 7 Days To Owning A Home: Day 1 – Your Credit

3. 7 Days To Owning A Home: Day 2  - Financials 

As a homeowner, here are some of the expenses you will experience:

1. Homeowner’s Insurance

2. Taxes

3. Emergency Repairs and Home Improvements

4. Landscaping

5. Utilities

When determining your budget you need to keep these things in mind and plan accordingly.

Lenders are currently only willing to lend an amount where the monthly payment, including taxes and insurance, equals up to 38% of your gross monthly income. FHA loans stretch these numbers somewhat and you may be able to find a loan program willing to lend up to 42%  of your gross monthly income. We suggest that you use bankrate.com where you will find multiple calculators that can help you determine what you can  afford.

The biggest mistake people made in the past is that they purchased houses based on the current payment and then found that once the loan began to amortize or the interest rate increased, they could no longer make the payments. We suggest that you get a fixed rate loan and have a cushion each month that will allow you to save for the inevitable extras that come with home ownership.

The ability to make payments and comfort level associated with this type of decision is wholly personal. Many people find that they need to have extra money every month for a new car payment, vacations, and other expenses that, although not required, are enjoyable. Lenders do not look at these additional expenses and do not take into account anything but income and credit score when determining your loan worthiness. This puts the entire burden on you!

Make a budget. There are many sites where you can create a budget for yourself, such as Mint.com and Yodlee.com. 

When you are looking at your budget anticipate what you believe the expenses in the new home will be. After the budget is done and you deduct your mortgage payment, make sure there is enough left to save a little and cover those emergencies that inevitably pop up from time to time.  Seek professional help from a financial planner or accountant who will be more than happy to help you work on your budget.

Related Posts:

1.   7 Days To Owning A Home: Day 1 – Your Credit

2.  7 Days To Owning A Home

Credit reports are  an indicator of a persons ability and likeliness to repay a loan. There are multiple considerations that go into determining a credit a score and many of them are counterintuitive and unknown to most potential borrowers. 

A few points of interest regarding credit scores:

1. Credit scores are as much about debt and repayment as they are about lack of debt and repayment.

Most people believe that having a large amount of available credit is good for your credit score when in fact this may not be the case. Having available lines credit can be very detrimental to a borrower because creditors see the ability of the borrower to quickly and easily borrow more than they are able to repay. The best possible scenerio is for a borrower to have about one third of their available credit lines in use at any one time and to payoff those lines down to between ten and twenty percent every month.  This shows the ability of the borrower to borrow only what they can repay, to repay at least what they borrowed and to be a consciencious debtor.

2. When one credit card goes bad, they all go bad.

The current trend for credit issuers is to constantly look at your credit. If you are late on one credit card, all of your other credit cards may lower your available credit lines, and in some instances cancel them completely. Taken with the debt ratio discussed above this can significantly impact your credit score. (Note: There are changes being made to the credit card laws and will take place in phases.  Phase one began on August 21, 2009). If creditors lower your available credit, as a borrower you may become viewed as high risk because you are almost maxxed out on your credit cards, when a month earlier you had availability on your credit cards. One way to quickly and easily correct an issue like this is to call your credit card issuers and ask for your line to be increased and your interest rate to be lowered. Credit card companies are willing to help you and this will help your credit rating.

3. Being a co-borrower

If you signed a loan for someone else as a co-borrower, this will appear on your credit report. The outstanding debt will reflect as though it is your responsibility to make payments on a monthly basis and in fact, it is! If the primary borrower should fail to make a timely payment, the credit issuer will look to you for payment and will report both you and the primary borrower as delinquent.  Credit agencies understand that certain obligations are more important than others. Being late on a home loan is the most damaging late possible, while a car payment is second, with unsecured debt like credit cards coming in last place. As a coborrower, your credit will not be impacted as much as the primary borrower’s, but the hit to your credit report will be significant.

4. Spread the wealth.

Every borrower should have between three and five rotating unsecured credit lines. Too many is not good and too few is just as bad.  Credit is about balance. To this end also be aware that having one or two cards with no remaining credit available and the rest of your cards not in use at all may also negatively impact your credit score. The best possible scenerio is to have each credit line with a little debt showing that you are able to make multiple payments and handle many financial responsibilies every month.

In short, make sure your credit report is as accurate as possible and challange anything and everything that you believe should not be there.  Try to pay down debt in incriments, do not make a huge lump sum payment to your credit cards but rather use them less and pay a little more to reduce the principle owed slowly over a few months until you reach about one third of your total credit line outstanding, this will significantly increase your credit score. 

As a side note, you can order your credit report as many times as you like without negatively impacting your credit, however if others run your credit multiple times your credit score will decrease. Get a recent copy of your credit report and take it with you when you decide to seek financing and do not authorize any lender to run your credit report until you have decided on the loan you want to take. After that point if a lender runs your credit to verify your scores it will not damage your scores. If you allow every lender you meet with to run your credit report it could cost you a hundred points.

The prospect of buying a home can be overwhelming.  I am going to help you through the process and give you a ton of valuable and usuable information in a format that will allow you to really analyze your decision to purchase to a home; encompassing everything from how to prepare yourself and your financials to finding the right help, finding the right home, finding the right financing and closing. 

7 Days to Owning A Home

Over the next 7 days, I will give you all of the information you need to prepare to purchase your largest investment…your home. Most people only go through the rigors of buying a home a few times in their life, I have been involved in thousands of transactions involving the purchase of a home. All of the information will help you to navigate your way through what can be a long and tedious process. You may even learn something about your preferences, finances and credit along the way.

Related Posts:

1. 7 Days To Owning A Home: Day 1 – Your Credit

2. 7 Days To Owning A Home – Day 2 Financials

Created by Susan Cartier Liebel (Build a Solo Practice, LLC), Solo Practice University™ is where lawyers and law students can go to learn how to start and run a law practice-and find resources for supporting your journey in or alongside the law.   Solo Practice University™ is where lawyers can go to find all the information they need to actually practice law.  It helps attorneys pick up where law school left off.  It’s amazing!

I will be teaching “The Basics Of Real Estate” and then once that class is complete, I will begin teaching more advanced Real Estate law.  I am looking forward to this amazing new endeavor.  The first class was posted on July 27, 2009 and there will new classes added every month.

Come on over Solo Practice University™ and check it out!