Hot Mortgage Deals

A short sale is a sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan and is a strategy rapidly gaining popularity in the real estate market. It is a real estate sales transaction in which the seller’s mortgage lender agrees a payoff that is less than the balance due on the loan and in which the borrower does not have to pay the difference. This agreement takes place between the seller and their lender, prior to the onset of foreclosure, allowing the home to be sold for less than the current outstanding loan balance. When a homeowner owes more on their home than it is worth, a short sale may be an option. The goal of a short sale is to help the homeowner avoid foreclosure and when both the borrower and the lender agree to the short sale process, it generally enables the avoidance of foreclosure, which involves hefty fees for the bank and poorer credit report outcomes for the borrowers. Keep in mind that, unlike bankruptcy line items, short sales do show on a credit report and can remain on your credit report for 7-10 years.

A real estate investor engaging for the first time in foreclosures and short sales will need to know exactly what a short sale is and clearly understand the process involved in a short sale. A key component for a buyer to be successful when purchasing a short sale is to make sure that they do research on the market conditions and area of the home. Although aquisition through a short sale can be a successful strategy in purchasing distressed real estate, due to the real estate market’s foreseeable inconsistencies a buyer can purchase a home and still experience additional reduction in value. Keep in mind that while Lenders want to get rid of distressed properties as soon as possible, they typically aren’t going to sell them for ridiculously low prices. It is also important to remember that it is very possible that a short sale can and will fall through if the Broker Price Opinions come in much higher than the agreed upon price.

A real estate short sale is a strategy that can help homeowners who owe more for their house than the houses are worth, and is another option of relief for troubled homeowners. Before proceeding with a short sale it is imperative to evaluate your personal situation and determine if a real estate short sale is right for you. A short sale is typically faster and less expensive than a foreclosure, but there are downsides that merit consideration as well. Sellers should be careful to consult with their lenders and tax advisers as to the impact of a short sale and clearly understand the impact of the potential outcomes. If all other options have been exhausted and a short sale is the best choice, it is highly recommended that the seller work with a licensed real estate agent who can assist in listing the home for sale. Sellers should also keep in mind that Buyers can get tired of waiting for short sale approval and cancel because banks can’t process their short sales fast enough. Buyers need to understand the current market conditions and values and work with a Realtor they trust. However, when utilized in the appropriate situations a short sale can be beneficial to all parties involved.

Unfortunately nothing is free in this world; even dying costs around $5,000 dollars, for an average funeral in the US.  Applying for loan modifications can be pricey also. Sadly the procedure that could save you from foreclosing on your home and even bankruptcy is also rather expensive, which scares many homeowners off, pushing them further into debt when sometimes they qualify for a loan modification.

The collateral expenses of a loan modification are various. You have to invest large amounts of time in order to apply and get the paperwork together. If you are self employed or are too busy at work to do this in your spare time, it could cost you a lot in lost work or business.

This has made many borrowers hire the services of loan modification companies so they can take care of all the red tape and complicated paperwork. Unfortunately this has created yet another collateral expense for homeowners. These companies can be very expensive, especially for families that are already on the brink of a financial breakdown.

In order to avoid this cost it is worth investing a little time understanding the requirements for a modification and visiting a free counselor near you. Phone the HOPE hotline and ask which free counseling agency is closer to you. They will be able to help you put your paperwork together without charging you hundreds if not thousands of dollars.

Other types of expenses homeowners must think about when submitting a loan modification are hidden costs like inspection fees, and late payment fees. Banks will often require a home inspection before granting a loan modification. As annoying as it is to have to undergo a second inspection on your home it could be necessary in order to pass the NPV test.

The NPV or Net Present Value test is a requirement for any homeowner that is requesting a loan modification. The test quantifies the profitability for the bank of granting the modification. This means that the bank is only going to give you a modification if doing so is more profitable than simply foreclosing the mortgage.  Although there are many factors that make up the test, a current valuation of the home is required. It could even be in your interest if there is a new inspection that shows that the current value of the home is below the value of the mortgage.

Late fees are another issue for troubled homeowners that are seeking financial help. It is possible that your bank will grant you a loan modification but charge you for inspection fees and late charges on the side. This could make your total monthly mortgage payments increase even though your modified loan has lower payments.

It is a good idea to ask your bank for a good faith estimate to the cost of the loan modification and the monthly payments that will result from the modification. Make sure they include all expenses and that they include the expenses back into the mortgage. This way your monthly payments will not consist of two mortgage payments, your modified loan and the collateral expenses.

Related posts:

1. Loan Modifications Questions: Fees, Inspections, Late Charges And Other Concerns
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. Loan Modifications: The Loan Workout Formula To Accelerate Your Modification

Related posts:

1. Loan Modifications Questions: Fees, Inspections, Late Charges And Other Concerns
2. Loan Modifications, NPV Test the Key to Loan Modification Success
3. Loan Modifications: The Loan Workout Formula To Accelerate Your Modification

If loan modifications are not an option and you want to avoid foreclosure or bankruptcy a short sale of your home might be a good option. The key when you are undergoing a bad financial situation is like with every emergency and try to think clearly without letting raw emotions take over. You must analyze the situation and work out what is the best option for you. Although it is a good idea to hire an experienced lawyer in real estate issues, nobody can do all the thinking for you, you have a unique understanding of your situation and more importantly you will be the one that will suffer or enjoy the consequences of your decisions.

A short sale is the sale of your home at a price lower than the purchasing price. It is an option to be considered if you do not qualify for a loan modification, due to a lack of income or when you own a home that is worth less than what you owe on the mortgage.

Obviously the key player in a short sale is the lender. The lender is, after all, the party that may have to take any losses that occur by short selling the house. However, in some short sale agreements the buyer can be made responsible for the difference between the price of the short sale and the balance of the mortgage. Needless to say that is not the ideal type of mortgage for you, the homeowner.

There are three possible outcomes a lender may agree to when negotiating a short sale. The key concept you negotiate in a short sale is what will happen with the deficiency balance or the difference between price of the short sale and the pending balance on the loan.

The first option a lender may try for is to lay the deficiency balance on the lap of the homeowner once the short sale has been carried out. Needless to say homeowners do not often profit all that much from this kind of short sale.

A second option is for the homeowner to sign a promissory note to the lender for the deficiency balance. This means that the homeowner will have to pay whatever agreed in the promissory note if the there is a deficiency balance after the short sale. However if the deficiency balance is larger than what the homeowner agreed to pay in the promissory note the lender will absorb the difference.

The third option is the one you need to aim for if you are the homeowner. In this case the lender agrees to cancel the entire deficiency balance, or difference between the short sale and the pending balance on the mortgage. As you probably guessed lenders are not waiting in line to offer this kind of deal, you will have to work hard for it.

The most important part of negotiating a short sale is to convince the lender that it is in their best interest to accept a short sale. To do this you must a) prove you cannot afford the mortgage due to a valid hardship and do not have the assets to pay for the mortgage and b) present your home as a business opportunity for the bank.

In order to do all that, you are going to have to submit a whole lot of paperwork to your lender. This will include:

A)     A hardship letter that explains why you are in financial trouble and explains how you do not have the income or savings to pay for the mortgage.

B)     Proof for all the claims you make in your hardship letter. This will include proof of unemployment or of your current pay if you are still working.  You will also need to prove what income you have through  bank statements and tax returns. The lender will no doubt ask you if you have access to pension funds, stocks or some other type of investment. You will have to provide a written statement that answers these questions and explains why they are not accessible.

C)     You need to provide an up-to-date valuation on your home. This you can carry out with a broker’s appraisal and by providing analysis of closed deals or active listings of similar properties in your neighborhood.

D)    Authorization to the lender to release information on you and the property.

It is a good idea to prepare this paperwork with care and hire a good real estate attorney. The good news is that if you play it well you can include the price of the lawyer in the proceedings costs covered by the lender.

Related posts:

1. Loan Modification Alternatives: Short Sale Your Home
2. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
3. Deed In Lieu of Foreclosure, The Last Resort Loan Modification

Related posts:

1. Loan Modification Alternatives: Short Sale Your Home
2. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
3. Deed In Lieu of Foreclosure, The Last Resort Loan Modification

If you do not qualify for a loan modification, and foreclosure seems unavoidable, there are steps you can take to make the most of a bad situation. One of these options is arranging with your lender for a Deed in Lieu of Foreclosure.

What does this mean?

It means you hand over the deed, or ownership, of your house to the lender in exchange of clearing your debt. The homeowner loses his home but is left without a debt while the lender takes immediate control of the house.

What advantages does this option have?

In certain circumstances a Deed in Lieu of Foreclosure can have significant advantages for both the lender and the buyer.

1)     The lender can take immediate control over the property. A much more efficient method than foreclosure proceedings that can take years to finish.

2)     The borrower foregoes his home but is left without any debt.

3)     Lenders can save themselves a lot of money in court expenses, time and other complications if they avoid a typical repossession procedure.

4)     Borrowers that avoid a foreclosure will remove the stain on their record and in some cases avoid bankruptcy.

What are the requirements for a Deed in Lieu of Foreclosure to be carried out?

1) The market value of the home must be less than the current balance of the mortgage.

2) There must be no third party credits secured by the home, like a second mortgage or a secured car loan.

Although it might seem counterintuitive for a homeowner to let his home, probably his largest investment, go without anything to show for it, it can be a much better alternative than a long and painful foreclosure. Borrowers don’t have to see their credit score hurt and can start again elsewhere, while lenders can cut their losses and try to make the most of a bad loan without having to continue spending money and resources.

In what circumstances should a homeowner think about handing a Deed in Lieu of Foreclosure?

Obviously, homeowners that are going through financial difficulties and cannot afford their monthly mortgage payments. However if they still have some sort of income then they may well qualify for a home modification or some other option. This path is more suited for homeowners that either cannot afford any kind of loan modification or feel that their home is too underwater, worth less than the mortgage balance, to be worth saving.

How is it done?

Both parties must agree to sign an Agreement in Lieu of Foreclosure. This document transfers ownership to the lender. In some cases the homeowner might pay a certain amount of money to reduce the loan and make sure her credit score is not affected. Once the document is signed the lender will issue a waiver to deficiency judgment, which will be used if the sale of the house is below the value of the mortgage. After this an escrow service executes the agreement; releasing both the lender and the borrower from their mortgage contract.

Related posts:

1. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
2. What Is A Foreclosure?
3. What Is A Loan Modification? The Three Keys To Loan Modification Success

Related posts:

1. Foreclosure or Bankruptcy, What to Do When Loan Modifications Don’t Work
2. What Is A Foreclosure?
3. What Is A Loan Modification? The Three Keys To Loan Modification Success

Short Selling your home could be the win-win-win alternative to loan modifications. Loan modifications can be expensive for lenders and borrowers. Foreclosures are even more expensive costing lenders billions of dollars. According to a study carried out by the congressional Joint Economic Committee (www.jec.senate.gov) each foreclosure can cost lenders as much as $50,000. Homeowners naturally don’t appreciate foreclosures either as they often end up causing borrowers to file for bankruptcy besides losing their home.

The other players in the foreclosure game are the neighbors of the homeowners that lose their home. The empty homes that are dumped on the market bring down the prices of all the homes in the neighborhood.

Short Sales can be a win-win-win situation for the lender, borrower and everybody else.

Why?

Well short sales are not without disadvantages but they do carry three great advantages:

1)      The seller gets out of the mortgage liability without having to face bankruptcy.

2)      The buyer gets a home for a reduced price.

3)      The lender  gets rid of the house at a relatively minimal loss without having to waste money, time and energy on a foreclosure.

So what is a short sale exactly? Short sales are a process by which a home is sold quickly for a reduced price. Typically the lender agrees to “forget” the difference between the debt and the price the house is sold at. It does seem strange that a bank or private lender will be willing to sell a house at a loss and forgive the outstanding debt. However the case is that even though lenders don’t make a profit short selling can be a much better (i.e. cheaper) solution than foreclosing or even modifying a loan.

Let’s illustrate a scenario where a short sale might make sense. Imagine you own a house that is worth $100,000, you owe $120,000 on your mortgage. You approach your mortgage provider and explain you have lost your job and are unlikely to be able to find a good enough job to continue repaying your $2000 a month mortgage. The ank agrees you are unlikely to be able to pay in the future and accepts your proposal of short selling your home. You sell it at $75,000 and the bank absorbs the $50,000. Obviously the key part is to convince your bank that paying the difference of your mortgage and the price of the home is going to be cheaper or better business than foreclosure a full bankruptcy.

Related posts:

1. Loan Modification Alternatives: Is Renting Your Home A Viable Option
2. Short Sale Bonus Prize
3. Is a Short Sale Right for You?

Related posts:

1. Loan Modification Alternatives: Is Renting Your Home A Viable Option
2. Short Sale Bonus Prize
3. Is a Short Sale Right for You?

Last week I received a very interesting comment on one of my articles on loan modifications. The comment claimed that for most underwater borrowers (homeowners that owe more on their property than it is worth) a “strategic default” is smartest way to go.

I had some months ago written an article claiming along similar lines that in many cases foreclosure is the only logical conclusion when homeowners had overspent on their homes and could no longer afford the overpriced luxury homes they had unwisely bought at the crest of the housing boom.

Readers response ranged from claims that greedy buyers had it coming and deserved to lose homes they should never had bought to angry comments from people that felt my cold perspective was detached from the real plight of homeowners.

Opinions on the issue of loan modifications typically polarize to these two opposite views. 1) That loan modifications are an unwelcome intervention to the “natural” forces of free market and 2) that “saving” troubled homeowners is the responsibility of Government and the god given right of homeowners.

The comment I mentioned above intertwined these two views in an arguably “immoral” but very pragmatic perspective that you will hate or love.

The proposition is that if done smartly a foreclosure can provide a clean slate for troubled homeowners that can’t realistically save their homes. Banks won’t like this option but homeowners need to care for themselves, banks certainly do so.  These are the steps our anonymous commentator suggests, with some gentle editing:

1)      Let the lender foreclose. During this time you will of course not have to pay your mortgage payments.

2)      Just before your property is to be sold declare bankruptcy. This will wipe out all liability for the mortgage debt, if this is an issue in your state, eliminate all other unsecured debt and in the process buy you a few more months to move and during which you can save your mortgage payments towards your move.

3)      Start rebuilding your life. The market is a mess now anyway and most likely will continue like this for several years. Your credit will be destroyed by the bankruptcy and will appear on credit reports for 7 to 10 years but during this time you can rent while your credit scores improve. In two to three years you could have a decent credit score if you don’t get into more trouble. After only 2 years of a bankruptcy you can qualify for loans that allow for persons who have had a foreclosure/bankruptcy, like FHA for example.

Editors note: Bankruptcy laws have tightened up a bit so this “advice” might be underestimating how many years you will be unable to take a loan and the annoying detail that the government will be pretty much running your financial life for you for years after declaring bankruptcy.

This option is not a great one for loan modification agents, as they don’t get any money out of it but might be a good option for some troubled homeowners.

I must say that I don’t feel this option is a responsible or moral way of dealing with debt but it is another option. Unfortunately the credit culture we live in moves people to spend money they don’t have on things they don’t need. The idea that all that waste can be made to disappear with a convenient bankruptcy does not seem fair. However there are many homeowners that have fallen into dire straits without being irresponsible because of unemployment and the drop in house prices.

Related posts:

1. Loan Modification Alternatives: Wells Fargo Interest Only Loans
2. TARP, Loan Modification And Other Disaster stories.
3. Loan Modification Alternatives: Short Sale Your Home

Related posts:

1. Loan Modification Alternatives: Wells Fargo Interest Only Loans
2. TARP, Loan Modification And Other Disaster stories.
3. Loan Modification Alternatives: Short Sale Your Home

There is nothing harder than helping someone who doesn’t think they need help. That statement is certainly true for borrowers and debt relief. We live in such a crazy consumerist society that sometimes we don’t realize when we are living beyond our means and are in need of urgent help. Like an anorexic teenager we can look into the mirror and see a financially healthy person while we are really killing ourselves. How can you tell if you are in serious need of debt relief?

We are going to mention a number of signs that will tell you that you need urgent help. Obviously these are not set rules but more like a general ballpark of financial safety you must try to stay within.

1) You have no savings. We live in a spend first pay later culture, not a save now buy later culture. This mentality increases the chances of financial problems and reduces the value of things that can be purchases on a whim and on which we must often pay interest for years. Many governments are trying to fight this attitude by encouraging people to save. A good rule of thumb is to save at least 10% of your income.

2) You only make minimum payments on your credit cards. Uncontrolled spending on credit cards can be one of the fastest routes to bankruptcy. Spending money you can’t see and don’t have to pay back in a hurry is a great recipe for financial bankruptcy. It is important to pay for your credit cards before they accrue interest or to use credit cards as an emergency ONLY and use other financial products like loans, equity loans and other options for borrowing. Paying minimal credit card payments is a silly path to everlasting loans that you end up never paying.

3) You don’t check your statements and don’t know exactly how much you owe. As we mentioned in our previous article fear often breeds on ignorance and when we are fearful we sometimes hide behind our ignorance as if it were a shield. Understanding our situation is the first step to fixing it.

4) You have more than 3 major credit cards. There is really no need for various credit cards when you are not leaving beyond your means, one or two are more than enough. It is a slippery slope when we start relying on credit cards to get to the end of the month, buy things we can’t afford and eventually to pay the interest of other credit cards.

None of these situations is final or hopeless. However action is required to avoid the problems that bad financial habits can cause you. Finding the right advice and sticking it can be the difference between bankruptcy and financial security.

Related posts:

1. New Credit Card Rules Spells Good News For Debt Relief
2. Credit Cards, Debt Relief And Bad Choices
3. Debt Relief, How To Get The Counsel You Need

Related posts:

1. New Credit Card Rules Spells Good News For Debt Relief
2. Credit Cards, Debt Relief And Bad Choices
3. Debt Relief, How To Get The Counsel You Need

If the property isn't in foreclosure, contact your lender to see if a loan modification is possible.

Keep Your Finances Afloat With Suitable Loan Modifications

You don’t start worrying when you hit the iceberg; you make sure you are working hard to avoid foreclosure or financial duress as soon as you hear the radio signals warning you of danger. Just as Titanic was prey of bad planning, pride and reckless behavior many of us fall prey to foreclosure and financial difficulties when there is really no need for it.

This is not rocket science, we all start saving on non-vital aspects of our monthly spending when we our income is reduced or we fear we might lose our job. However we often think of our mortgage as a fixed expense that cannot be modified or fine-tuned. The reality is completely different. Mortgage providers like banks and other lending institutions know too well that many borrowers and their families are struggling and they appreciate responsible clients that are willing to make sensible modification or changes to their mortgage than simply foreclose or claim bankruptcy. Here are some basic steps to keeping your family finances afloat by fine-tuning your mortgage.

1) Be sensible in the percentage of your income that is used to pay your mortgage. A conservative rule of thumb is to not spend more than 30% of your total income on your mortgage. The origin of this guideline is quite interesting. Apparently it began when railway companies started to spread over the continent and supply housing for their workers, they would charge a week from every month of their wages for housing. Situations have changed completely and this rule is obviously not set in stone but if you are spending much more than 30% on your house you are probably spending too much and not leaving yourself with much room for maneuvering in case of financial difficulties.

2) Don’t remortgage to “invest” in your home. Too many have fallen in the trap to remortgage their home to invest in house improvements. If you need the house improvements and you can afford them I would recommend saving for them or if you really must borrowing for them , but don’t view them as an investment that elicits large lumps of cash. In the current market you are very unlikely to get your investment back and quite likely to pay dearly for the loan increase.

3) Talk to your bank as soon as possible if you see trouble.  Banks appreciate customers who will be candid and realistic about their situation and are much more willing to renegotiate when you are not in the red yet. If you are expecting a large payment or your income is seasonal you might be able to renegotiate a payment holiday for a certain amount of time. Remember that banks are likely to make money or loan modifications like this instead of losing a lot of cash when a client forecloses their mortgage.

4) Don’t panic. Talk to an experienced financial advisor or to a trusted and knowledgeable friend. Bad situations can often  be averted or fixed if caught in time.

Related posts:

1. Benefits For All When Loan Modifications Work
2. Avoid Foreclosure With A Personalized Home Loan Modification
3. Loan Modifications on Your Own

Related posts:

1. Benefits For All When Loan Modifications Work
2. Avoid Foreclosure With A Personalized Home Loan Modification
3. Loan Modifications on Your Own

Struggling to make ends meet can be a way to survive, but it gets awfully hard if you or a family member gets sick. Millions of Americans are pushed over the edge into bankruptcy or foreclosure because of high medical bills.