Tuesday, May 14, 2013
Make Your Home Is an Investment and a Liability
For
years, homeowners have had pride in home-ownership. Lately, the American dream of home ownership has been threatened for many in our country. Here are some tips to help you maintain your greatest possession:
Understand that your home is an important debt
The biggest debt that most consumers have is their home loan. Your home is your castle. Hopefully, you didn't buy more castle than you can afford.
You may have assumed that the value of your home would never drop. Maybe you were hoping that your income would increase so that you could afford the higher payments. Maybe you forgot to add in the cost of maintenance, insurance, and taxes on your house. For whatever reasons, many people fool themselves into buying more house than they can comfortably afford.
Hang onto your home
If you bought your home with an adjustable-rate mortgage (ARM), the interest rate on your loan may be resetting to a higher rate soon. If you have an ARM, make an appointment as soon as possible with your home loan provider. Assure them that you will work with them closely to keep your home. Get a printout of your reset mortgage estimate, including what your new monthly mortgage will be and when it will start. If the reset rate is higher, you will have to pay more each month to keep your home. Start preparing for this new expense immediately.
If you have good credit and want to avoid the uncertainty of adjustable interest rates, you can try to refinance your home with a fixed interest rate. In a time of tight mortgage credit, however, this can be more difficult to do. If you need to refinance and you can't find a new loan, ask your lender for help. Document your efforts.
Avoid foreclosure
Many homes across the country go into foreclosure. If you are afraid that you can no longer pay your home mortgage, you may be facing foreclosure, too. Whatever you do, try to avoid foreclosure.
Here are some online resources to help you prevent foreclosure:
· hud.gov/foreclosure (800-569-4287). HUD is the U.S. Department of Housing and Urban Development. This site lists HUD-certified credit and foreclosure prevention counseling agencies.
· housing.org (888-331-3332). Project Sentinel is a local HUD-certified counseling agency.
· nhssv.org (408-279-2600). Neighborhood Housing Services Silicon Valley is another local HUD-certified counseling agencies.
· homeloanlearningcenter.com. Mortgage Bankers Associations Home Loan Learning Center has information under Your Finances, then Foreclosure and Delinquency.
· 995hope.org (888-995-HOPE). This is the site for Home ownership Preservation Foundation.
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The Five Big Home Loan Modification Mistakes
As the housing crisis continues to build momentum across the
country, successful home loan modifications are the only course of
action standing between homeowners' ability to stay in their homes and
being forced to move due to a foreclosure. If events leading to a
foreclosure are unfolding quickly, a modification becomes a one shot
chance that must be done correctly and as efficiently as possible. The
following are the five big mistakes homeowners commonly make which can
slow the process to a crawl or result in non-approval. They are:
1. Being unrealistic - If you are falling behind on your mortgage payments without a foreseeable change such as a raise or a higher paying new job, the problem is not going to go away on its own. Start pulling your paperwork together, learn as much as you can about loan modifications, and begin interviewing to get the best representation possible for your situation.
2. Dishonesty - You can assume that just about all your past sins can be discovered during the loan modification process. The new 4506-T form will allow your lender to pull the tax returns you filed to see if they match the returns you turned in with your application. Different versions can be a big problem for the homeowner. Many homeowners don't realize that their lender still has the original application file when they were trying to look as good as possible in order to get that approval. Trying to hide a big account when applying for a loan modification will raise questions about your integrity and, at the very least, slow the modification process. It's much better to lay all your cards on the table and let your attorney decide how to best present it.
3. A poorly written hardship letter - The main requirement for a loan modification is verifiable financial hardship. A poorly written letter which doesn't explain your hardship or how you are handling it can get you kicked out of the process before it starts. Instead, writing a letter which details the events leading to the hardship with backing documents is a great start. Finishing the letter with your plan on solving your existing situation will give your lender the confidence that your circumstances are temporary and that you are still a good loan risk.
4. Incomplete documents - Nothing slows down a loan modification like waiting for documents. Furnish everything asked of you at the beginning of the process as quickly as possible, making copies of it before turning it in. Additionally, if you are asked for supplemental paperwork like pay stubs along the way, get them in as quickly as possible.
5. Going it alone - Getting a Loan Modification executed to avoid foreclosure with terms that address your specific needs is no small undertaking. Going it alone in one of the most important missions in your life may save you some money initially but over the long term is likely to be more expensive and could literally cost you the roof over your head. Instead, hire an experienced loan modification attorney to give yourself the best chance at a successful modification with terms that are within your budget and sustainable for the long term.
And one critical mistake many homeowners make after a successful loan modification:
6. Using the extra money resulting from lower mortgage payments on unnecessary stuff - A high number of loan modifications go back into default within months of the modification's completion because the borrowers go back to spending money over and above their budget. Instead, save the extra funds to start rebuilding your savings in the event of a job loss or other reduction in income.
1. Being unrealistic - If you are falling behind on your mortgage payments without a foreseeable change such as a raise or a higher paying new job, the problem is not going to go away on its own. Start pulling your paperwork together, learn as much as you can about loan modifications, and begin interviewing to get the best representation possible for your situation.
2. Dishonesty - You can assume that just about all your past sins can be discovered during the loan modification process. The new 4506-T form will allow your lender to pull the tax returns you filed to see if they match the returns you turned in with your application. Different versions can be a big problem for the homeowner. Many homeowners don't realize that their lender still has the original application file when they were trying to look as good as possible in order to get that approval. Trying to hide a big account when applying for a loan modification will raise questions about your integrity and, at the very least, slow the modification process. It's much better to lay all your cards on the table and let your attorney decide how to best present it.
3. A poorly written hardship letter - The main requirement for a loan modification is verifiable financial hardship. A poorly written letter which doesn't explain your hardship or how you are handling it can get you kicked out of the process before it starts. Instead, writing a letter which details the events leading to the hardship with backing documents is a great start. Finishing the letter with your plan on solving your existing situation will give your lender the confidence that your circumstances are temporary and that you are still a good loan risk.
4. Incomplete documents - Nothing slows down a loan modification like waiting for documents. Furnish everything asked of you at the beginning of the process as quickly as possible, making copies of it before turning it in. Additionally, if you are asked for supplemental paperwork like pay stubs along the way, get them in as quickly as possible.
5. Going it alone - Getting a Loan Modification executed to avoid foreclosure with terms that address your specific needs is no small undertaking. Going it alone in one of the most important missions in your life may save you some money initially but over the long term is likely to be more expensive and could literally cost you the roof over your head. Instead, hire an experienced loan modification attorney to give yourself the best chance at a successful modification with terms that are within your budget and sustainable for the long term.
And one critical mistake many homeowners make after a successful loan modification:
6. Using the extra money resulting from lower mortgage payments on unnecessary stuff - A high number of loan modifications go back into default within months of the modification's completion because the borrowers go back to spending money over and above their budget. Instead, save the extra funds to start rebuilding your savings in the event of a job loss or other reduction in income.
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