foreclosure http://www.wisebread.com/taxonomy/term/9933/all en-US 5 Questions to Ask Before Applying for a HELOC http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-applying-for-a-heloc" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/plastic_play_house_sitting_on_stacks_of_dollars.jpg" alt="Plastic play house sitting on stacks of dollars" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You've paid enough on your mortgage to build a solid amount of equity in your home. Now you want to tap into it; maybe you want to use the money to pay off high-interest credit card debt, help fund a child's college education, or take on a major kitchen remodel.</p> <p>You have two choices when it comes to using that equity: a home-equity loan or a home equity line of credit. These are two very different options, but many homeowners prefer the flexibility that comes with a home equity line of credit &mdash; better known as a HELOC &mdash; instead of the lump-sum payment they get with a home-equity loan. (See also: <a href="http://www.wisebread.com/home-equity-loan-or-heloc-which-is-right-for-you?ref=seealso" target="_blank">Home Equity Loan or HELOC: Which Is Right for You?</a>)</p> <p>But before you apply for a HELOC, make sure you answer a few key questions.</p> <h2>1. Do you know how a HELOC is different?</h2> <p>Equity is the key to both home-equity loans and HELOCs. Say your home is worth $250,000 and you owe $180,000 on your mortgage. You have $70,000 worth of equity.</p> <p>Your lender might approve you for a home-equity loan of $50,000. You'd receive that money in a lump sum. You'd pay it back each month, with interest, just like you do with your primary mortgage.</p> <p>A HELOC works differently. It acts more like a credit card, with your credit limit based on your home equity. If you have that same $70,000 of equity in your home, a lender might approve you for a HELOC of $60,000.</p> <p>Instead of getting a lump-sum payment, you'd get that $60,000 in the form of a line of credit, and only pay back what you borrow. If you used $30,000 to remodel a kitchen, you'd only pay back that $30,000, with interest. If you used the full $60,000, you'd have to pay that amount back.</p> <h2>2. Do you mind a bit of uncertainty?</h2> <p>Another difference between home-equity loans and HELOCs is that the former come with fixed interest rates, while lines of credit usually have variable interest rates. This means that your initial interest rate will usually be lower than what you'd get with a home-equity loan.</p> <p>But that initial rate will change over the life of your loan. It could &mdash; and usually will &mdash; climb depending on what economic indexes your rate is tied to. For instance, if your HELOC is tied to the Fed's prime rate, it will adjust every time the Federal Reserve adjusts this rate. Most HELOCs adjust either on a monthly basis or a quarterly one, rising or falling depending on the index to which it is tied.</p> <p>Home-equity loans come with initial higher rates, but these rates are fixed, meaning that they won't rise &mdash; or fall &mdash; over time.</p> <p>Are you OK with a bit of uncertainty when it comes to rates? If so, you could save significant money on interest with those low initial interest rates that come with a HELOC. You will have to take the risk that these low rates could one day rise higher than the fixed rate that you might pay on a home-equity loan.</p> <h2>3. How much flexibility do you need?</h2> <p>Home-equity loans are generally better for homeowners who need cash for a one-time event, such as paying for a child's college tuition. But HELOCs often work better when homeowners aren't quite sure how much money they'll need over time.</p> <p>Say you're remodeling your kitchen, but you're not sure exactly how much that project will cost. You take out a $40,000 HELOC. If your remodel only costs $25,000, all you withdraw on that line of credit is $25,000, and that's all you have to pay back.</p> <p>One of the main advantages of HELOCs is this flexibility: You only have to borrow what you need. And you don't have to know before applying for this line of credit exactly what that amount will be.</p> <h2>4. Can you pay it back?</h2> <p>Taking out a HELOC seems like an easy way to get quick access to a new line of credit. But before you take out a HELOC, make sure that you can pay back what you borrow.</p> <p>Unlike a credit card, a HELOC is secured debt, which means that your creditor can take something from you if you fail to pay back what you borrow. In the case of a HELOC, the money you borrow is secured by your home. If you fail to pay back the money you borrow, your lender could begin foreclosure proceedings against you.</p> <h2>5. Are you spending your money wisely?</h2> <p>There are good and bad reasons to take out a HELOC. Paying off high-interest credit card debt is usually a smart decision because the rates on a HELOC are much lower. But homeowners do need to be careful: Again, not paying back a HELOC could result in a lost home. Creditors can't take your home if you don't pay your credit card debt on time.</p> <p>Paying for major home improvements is also a good investment &hellip; usually. But tapping your equity might be a waste if you are making an improvement that won't add much value to your home. Generally, improvements such as updated kitchens and bathrooms, master-bedroom additions, and siding and roofing replacements will add value to your home. Adding a home office or in-ground swimming pool might not.</p> <p>But maybe you don't plan on selling your home, and you simply want to add something that will boost your enjoyment of it. In that case, using a HELOC for home improvements that won't necessarily result in a big payoff can make sense.</p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F5-questions-to-ask-before-applying-for-a-heloc&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F5%2520Questions%2520to%2520Ask%2520Before%2520Applying%2520for%2520a%2520HELOC.jpg&amp;description=5%20Questions%20to%20Ask%20Before%20Applying%20for%20a%20HELOC"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/5%20Questions%20to%20Ask%20Before%20Applying%20for%20a%20HELOC.jpg" alt="5 Questions to Ask Before Applying for a HELOC" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-ways-to-make-your-home-into-an-investment">6 Ways to Make Your Home Into an Investment</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-smartest-ways-to-use-a-home-equity-loan">4 Smartest Ways to Use a Home-Equity Loan</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-times-to-update-your-homeowners-insurance">7 Times to Update Your Homeowners Insurance</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing borrowing equity foreclosure helocs home equity line of credit lending remodeling secured debt Tue, 16 Jan 2018 09:30:10 +0000 Dan Rafter 2081070 at http://www.wisebread.com How to Make Ends Meet When You're House Poor http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-make-ends-meet-when-youre-house-poor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-608518550.jpg" alt="Woman learning how to make ends meet when she&#039;s house poor" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your home is supposed to be a source of joy, your respite from the rest of the world. But if you can barely afford your housing expenses each month, the pride of owning a home can quickly turn to dread. (See also: <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage?ref=seealso" target="_blank">8 Signs You're Paying Too Much for Your Mortgage</a>)</p> <h2>Being house poor</h2> <p>Mortgage lenders say that your total monthly debts, including your mortgage payment, should never equal more than 43 percent of your gross monthly income, your income before taxes are taken out. Financial professionals also say that your housing costs alone ideally should never exceed more than 28 percent of your gross monthly income.</p> <p>If you ignored those percentages when taking out your mortgage, or if a job loss or other financial crisis has reduced your income since you originally bought your home, you might now be feeling the financial pinch of paying for a house that simply consumes too much of your monthly income.</p> <p>Sometimes being house poor is a temporary condition. Maybe you've lost a job, but know that you can afford your home once you find a replacement. Maybe you've suffered an illness or injury that has kept you from working, but you will soon recover enough to begin earning again. Other times, it's a more permanent condition. You simply have a house that is too expensive for your income, even when that income is at its normal levels.</p> <p>If you're in the latter situation, the best decision might be to move and buy a home that is more affordable. If the house-poor problems you face are only temporary, though, you might be able to hold on until your financial situation improves.</p> <p>Fortunately, there are steps you can take if you find yourself struggling to make those housing payments each month.</p> <h2>Can a loan modification help?</h2> <p>Lenders might be willing to modify your mortgage to make it more affordable for you. Modifications might be simple and temporary, such as suspending your mortgage payments for two or three months as a way to allow you to resolve a temporary financial crisis without missing a payment. Or a modification can be more substantial: Lenders might change the terms of your loan, perhaps turning your 15-year loan into a 30-year one, leaving you with smaller monthly mortgage payments. They might also reduce your interest rate, again dropping your monthly payment.</p> <p>Lenders are not obligated to modify your mortgage loan, of course. But you won't find out if they're willing to make these changes if you don't call.</p> <h2>Refinancing might help</h2> <p>You might also <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">try to refinance</a> your existing mortgage to one with a lower rate or longer term. This will drop your payments, maybe to a level that you can more easily afford.</p> <p>Be aware, though, that refinancing isn't free. It might cost you $2,000, $3,000, or more to refinance, depending on the size of your loan &mdash; though you can usually roll these closing costs into your new loan instead of paying them upfront in one lump sum. Refinances take time, too. It can take 30 days or more for a refinance to close, so make sure you don't miss any payments during this time.</p> <h2>Cutting expenses</h2> <p>If staying in your home and reducing your monthly financial stress is a priority, then cutting expenses is a crucial step. You might not be able to lower your mortgage payment or property taxes, but you may be able to lower your utility bills. Cutting an expensive cable package or adjusting the thermostat by a few degrees can save you a substantial amount of money each month.</p> <p>Take a hard look at your budget and make the cuts. You might miss fun events and spend more time batch cooking, but it's worth it if you can keep your home. You might also take bigger steps. Is your monthly auto payment high, too? Consider selling your expensive car and buying one that comes with a smaller monthly payment.</p> <h2>Get a side gig</h2> <p>You can also boost your monthly income by taking a side job &mdash; anything from driving for a ride-sharing service like Lyft, to freelance writing, to a shift at your local grocery store. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <p>These jobs might not be glamorous, but if they boost your income each month, they can make those housing payments seem less fearsome. Again, you'll have to determine if working extra hours at a side job is worth being able to stay in your home.</p> <h2>Prioritize your home spending</h2> <p>Your mortgage is just one cost of owning a home. There's also the cost of maintenance, which financial experts say you should expect to spend about 1 percent of your home's purchase price on each year.</p> <p>You can't avoid maintenance. If you do, that dream home of yours might fall down around you. But you can prioritize your spending, something that can trim your monthly expenses. Don't spend money on a major bathroom remodel, or other purely cosmetic changes. But if your gutters need cleaning, your walls need painting, and your driveway needs sealing, do spend on those fixes, and do as much of it as possible on your own. Much of the cost in home repairs is in the labor. If you can do something safely and properly, doing it yourself will save a lot of money. Never try something that is beyond your skill and knowledge. YouTube videos can only take you so far. (See also: <a href="http://www.wisebread.com/the-top-10-diy-jobs-homeowners-should-avoid?ref=seealso" target="_blank">10 DIY Jobs Homeowners Should Avoid</a>)</p> <h2>Consider selling</h2> <p>If you are in danger of missing your mortgage payments, a refinance or modification isn't possible, and budget cuts won't make enough of an impact, it is time to consider selling your home.</p> <p>No one wants to give up on their home, especially if you consider it a dream residence. But it's simply not viable to think you can live 15 or more years scraping together for housing payments.</p> <p>If you want to sell quickly, a short sale might help. In a short sale, your lender allows you to sell your home for less than what you owe on your mortgage. For instance, if you owe $250,000 on your loan, your lender might approve a short sale for $225,000. By offering your home at a lower price, the hope is that it will sell at a faster pace, before you have to miss any mortgage payments.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-does-it-take-break-even-with-a-home-refi">How Long Does it Take Break Even With a Home ReFi?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage">Should We All Just Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-new-job-might-affect-your-mortgage-application">How Your New Job Might Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/weak-credit-you-can-still-get-a-mortgage-despite-tough-lending-standards">Weak Credit? You Can Still Get a Mortgage Despite Tough Lending Standards</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score foreclosure home loans house poor lenders missed payments modifications mortgage payments refinance Mon, 03 Apr 2017 08:30:12 +0000 Dan Rafter 1917875 at http://www.wisebread.com 7 Things You Should Know Before Buying a Foreclosed Home http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/7-things-you-should-know-before-buying-a-foreclosed-home" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_outside_home_000023276605.jpg" alt="Woman considering buying a foreclosed home" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're ready to buy a home, but you're also looking for a bargain. A foreclosed home seems like the ideal solution: You know that foreclosed properties typically sell for less &mdash; sometimes much less &mdash; than homes listed and sold on the open market by real estate agents and owners.</p> <p>But what you might not know is that buying a foreclosed property can also prove challenging to anyone who isn't a professional real estate investor. You might not know, either, that some foreclosed homes come with so much damage that the repairs needed to make them livable will quickly eat up any savings on their sales prices.</p> <p>Then there's the matter of actually buying a foreclosure. Depending on how you buy such a property, you might find yourself competing with others who buy, repair, and sell foreclosures for a living. Trying to outbid these pros for your foreclosure is no easy task.</p> <p>To sum up: <a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea" target="_blank">Buying a foreclosure</a> can be a challenge, one that could cost you plenty of time and money. Here are seven things you absolutely must know if you plan to buy a foreclosed property.&nbsp;</p> <h2>1. Foreclosure Inventory Is Falling</h2> <p>It's becoming more difficult to find a foreclosed property today. That's because fewer homeowners are falling into foreclosure. According to RealtyTrac, foreclosures were reported on 1.08 million U.S. properties last year. That's a drop of 3% from 2014, and a huge fall of 62% from 2010. Back in 2010, more than 2.87 million U.S. properties had foreclosure filings against them.</p> <h2>2. You Can Buy Foreclosures in One of Two Main Ways</h2> <p>There are two main ways to buy a foreclosed home. In the first, lenders auction off homes after the owners of these homes stop paying their mortgages. These properties are then sold at public auctions. The second main way to buy a foreclosure &mdash; the way that works better for most buyers who aren't professional real estate investors &mdash; is to buy a property after a bank takes ownership of it. These bank-owned properties are listed and sold by real estate agents. You can buy them just as you'd buy a home sold in the more traditional way.</p> <h2>3. Buying at Auction Is Not Easy</h2> <p>Buying a foreclosure at a real estate auction is not easy. First, you'll be trying to outbid professional real estate investors. Even more challenging, you'll need to pay for your foreclosed home with cash. It's not many consumers who have $200,000 or more in cash lying around.</p> <h2>4. Foreclosure Auctions Are Sight-Unseen</h2> <p>If you buy a foreclosure at an auction, you won't have the chance to tour its interiors. This means that you are buying the home sight unseen. You'll have no idea what repair jobs face you after you complete your purchase. The repairs could be extensive, and they could swallow any of the savings you expected to enjoy.</p> <h2>5. Buying Bank-Owned Foreclosures Is Far Easier</h2> <p>Buying a foreclosure owned by the bank is a far easier process. In this type of foreclosure, a bank &mdash; which has taken over ownership of a home after its former owners stop making mortgage payments &mdash; sells the house, hiring a real estate agent to close the sale. You can buy one of these bank-owned properties by making an offer, just as you would with any other type of home sale. The real estate agent representing the bank will take your offer, present it to the bank, and come back with a counteroffer if the bank doesn't like your original offer.</p> <h2>6. You Can Still Enjoy Significant Savings With Bank-Owned Foreclosures</h2> <p>RealtyTrac reported that the average bank-owned home sold for 38% less than comparable homes sold at market-rate figures. This means that buyers can save a significant amount of money buying a foreclosure even if they don't do it at the auction level.</p> <h2>7. You Absolutely Need a Home Inspection</h2> <p>Never buy a foreclosed home owned by a bank without first hiring a home inspector to come tour it. Unlike with a foreclosed home bought at auction, you do have the right to a home inspection before closing your sale. Make sure to take advantage of this opportunity. Many foreclosed homes need serious repairs. A home inspector can find these trouble spots. Once you are armed with this information, you can decide whether a particular foreclosure still qualifies as a bargain.</p> <p><em>Have you ever bought a foreclosed home?</em></p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2F7-things-you-should-know-before-buying-a-foreclosed-home&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2F7%2520Things%2520You%2520Should%2520Know%2520Before%2520Buying%2520a%2520Foreclosed%2520Home.jpg&amp;description=7%20Things%20You%20Should%20Know%20Before%20Buying%20a%20Foreclosed%20Home"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/7%20Things%20You%20Should%20Know%20Before%20Buying%20a%20Foreclosed%20Home.jpg" alt="7 Things You Should Know Before Buying a Foreclosed Home" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-at-a-foreclosure-auction">What Happens at a Foreclosure Auction?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-ways-to-buy-a-house-without-a-mortgage">4 Ways to Buy a House Without a Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-private-mortgage-insurance-anyway">What Is Private Mortgage Insurance, Anyway?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing auction bank owned home foreclosure house hunting new homeowners risk Wed, 04 May 2016 09:00:11 +0000 Dan Rafter 1703004 at http://www.wisebread.com Is Buying a Foreclosed Home Ever a Good Idea? http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/is-a-buying-a-foreclosed-home-ever-a-good-idea" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/home_sold_sign_000007866517.jpg" alt="Learning if buying a foreclosed home is ever a good idea" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Foreclosures are falling across the country. Real estate site RealtyTrac reports that the number of homes in foreclosure dropped 3% in 2015 compared to the previous year. But while foreclosure activity is dropping in most major cities, there are some metropolises where foreclosed properties still account for too large of a percentage of homes on the market.</p> <p>Here's the question for home buyers: Do high-foreclosure markets actually represent an opportunity? Do these cities give buyers a chance to get into city neighborhoods that they otherwise might not be able to afford?</p> <p>Yes, they do. But buyers have to be careful: Purchasing a home that is in foreclosure can lead to big problems.</p> <h2>Foreclosure Numbers</h2> <p>RealtyTrac said that at the end of 2015, 1.08 million U.S. properties had foreclosure filings on them. These filings include default notices, scheduled auctions, and bank repossessions. This figure is down 3% from the end of 2014.</p> <p>Even more impressive, it's down nearly 62% from 2010. That year saw 2.87 million U.S. properties with foreclosure filings on them &mdash; an all-time high.</p> <p>But five U.S. cities in particular are still struggling with too many foreclosures. RealtyTrac reported that as of the end of 2015, 3.43% of the housing units in the Atlantic City, NJ housing market had foreclosure filings. That's the highest percent of any the major U.S. markets that RealtyTrac charts.</p> <p>Other cities in the top five, according to RealtyTrac, are Trenton, NJ, with 2.14% of its housing stock having foreclosure filings; the Tampa Bay-St. Petersburg-Clearwater metropolitan area of Florida with a foreclosure rate of 2.03%; Jacksonville, FL, at 2.02%; and Miami, FL, at 1.98%.</p> <h2>Opportunities for Investors</h2> <p><a href="http://www.wisebread.com/3-terrible-things-foreclosure-does-to-your-credit">Foreclosures are bad news</a> for neighborhoods. That's because they tend to bring down the sales prices of the homes surrounding them, even those residences not in foreclosure.</p> <p>Say a neighborhood has several foreclosure homes that are selling for less than market value. This makes life difficult for other sellers. Sellers listing their homes at $200,000 will struggle to get that listing price if their neighborhood also features eight similar homes that are in foreclosure and all selling near $150,000.</p> <p>The buyers, looking for bargains, will make offers on those homes first. Other sellers can either lower their asking prices to compete more effectively with the foreclosures, or wait out the wave of local foreclosures in the hopes of nabbing a sales price closer to their actual list price.</p> <p>But while foreclosures might be a burden for sellers, they do present opportunities for buyers. A lower-priced foreclosure could help buyers find homes in neighborhoods that they otherwise couldn't afford.</p> <p>But buying foreclosures can also come with big headaches, mostly because these homes are often in terrible condition.</p> <h2>Foreclosure Traps to Avoid</h2> <p>You'll find the lowest prices for foreclosed homes by buying them at auction. But the auction process is also the riskiest way to buy foreclosures. That's because you won't have the chance to inspect a foreclosed home beforehand.</p> <p>Once you get your &quot;bargain&quot; home, you might find that it needs costly repairs that can quickly eat up the savings you thought you'd enjoy. A foreclosed home purchased through auction might also have liens filed against it, such as liens for outstanding tax payments. You might be on the hook for those unpaid taxes, and need to reach a settlement with the IRS.</p> <p>A safer choice is to buy homes that are owned by a bank. These properties, often referred to as REO or real-estate owned homes, have already been through the foreclosure process, with banks having taken them over. Banks will often sell these homes at prices below market value to get rid of them.</p> <p>The best news for buyers is that banks are required to pay off any liens filed against these properties. Buyers can also hire home inspectors to tour the homes before they buy them. These inspectors can help buyers determine how much they'll need to spend in repairs. Buyers can then calculate whether a particular foreclosure is a bargain or a potential money pit.</p> <p>A foreclosed home can present a savvy investment opportunity under the right circumstances. Do your homework, and you might just come away with a diamond in the rough.</p> <p><em>Have you ever purchased a home out of foreclosure?</em></p> <h2 style="text-align: center;">Like this article? Pin it!</h2> <div align="center"><a data-pin-do="buttonPin" data-pin-count="above" data-pin-tall="true" data-pin-save="true" href="https://www.pinterest.com/pin/create/button/?url=http%3A%2F%2Fwww.wisebread.com%2Fis-a-buying-a-foreclosed-home-ever-a-good-idea&amp;media=http%3A%2F%2Fwww.wisebread.com%2Ffiles%2Ffruganomics%2Fu5180%2FIs%2520Buying%2520a%2520Foreclosed%2520Home%2520Ever%2520a%2520Good%2520Idea-.jpg&amp;description=Is%20Buying%20a%20Foreclosed%20Home%20Ever%20a%20Good%20Idea%3F"></a></p> <script async defer src="//assets.pinterest.com/js/pinit.js"></script></div> <p style="text-align: center;"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/u5180/Is%20Buying%20a%20Foreclosed%20Home%20Ever%20a%20Good%20Idea-.jpg" alt="Is Buying a Foreclosed Home Ever a Good Idea?" width="250" height="374" /></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-happens-at-a-foreclosure-auction">What Happens at a Foreclosure Auction?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-housing-market-is-finally-rebounding">The Housing Market Is Finally Rebounding</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/quiz-am-i-really-ready-to-buy-a-home">Quiz: Am I Really Ready to Buy a Home?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing bank owned buying a house foreclosure housing market money pits Fri, 18 Mar 2016 11:30:08 +0000 Dan Rafter 1673870 at http://www.wisebread.com 5 Downsides of a Reverse Mortgage http://www.wisebread.com/5-downsides-of-a-reverse-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-downsides-of-a-reverse-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/new_house_drawing_000024284350.jpg" alt="Learning about the downsides of a reverse mortgage" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>A Home Equity Conversion Reverse Mortgage (HECM), more commonly known as a <em>reverse mortgage</em>, is often used as a means of income for retirees. For those age 62 or older, these loans can provide guaranteed income during retirement (See also: <a href="http://www.wisebread.com/6-ways-to-guarantee-income-in-retirement?ref=seealso">6 Ways to Guarantee Income in Retirement</a>).</p> <p>Though there are some similarities, reverse mortgages are not to be confused with home equity loans. Here, borrowers have to meet a minimum age restriction, hold the deed to their home, or have a relatively low balance that can be paid-off with a new loan. The home is then used as collateral for a new mortgage loan, up to $625,500 (or the lesser of the appraised value). But, instead of making monthly payments to the lender, the lender makes monthly payments to <em>you</em>, drawing on your home equity. It's a bit like purchasing an annuity using your home's value.</p> <p>Sounds good, right? Not so fast. Reverse mortgages come with some significant drawbacks for certain borrowers. Consider these negatives before taking out a reverse mortgage.</p> <h2>Downsides&nbsp;of Reverse Mortgages</h2> <p>On the surface, reverse mortgages probably sound like a pretty decent idea since the bank pays you, right? Well, in a report published by the Consumer Financial Protection Bureau (CFPB), between December 2011 to December 2014, the agency processed approximately <a href="http://files.consumerfinance.gov/f/201502_cfpb_report_snapshot-reverse-mortgage-complaints-december-2011-2014.pdf">1,200 consumer complaints</a> arising from reverse mortgages. Borrowers reported &quot;confusion and frustration over the terms&quot; and &quot;problems with loans servicing&quot; as culprits causing them to face foreclosure.</p> <h3>1. Unable to Refinance and Misleading Terms</h3> <p>It appears many borrowers enter into loan agreements without fully understanding the terms of the loan. Among the complaints received by the CFPB from borrowers and their family members was not being able to renegotiate. Borrowers felt they were paying a high interest rate and were being overcharged. Others said they did not realize their adjustable interest rate would increase so quickly.</p> <h3>2. High Upfront Costs and Interest Rates</h3> <p>In comparison to the costs for obtaining a regular home loan, reverse mortgage costs are higher due to the way loans are structured. They also have higher interest charges. Interest rates on reverse mortgages tend to be 1.5% higher than regular home loans. Final costs include closing costs, lender fees, mortgage insurance premiums, and finance charges.</p> <h3>3. A Burden on Heirs</h3> <p>Home equity loans aren't a great choice if you intend on leaving your home as part of an inheritance. That's because these loans not only draw on the value of your home equity, but they're also due immediately upon your death. If your plan is to leave the property to your heirs, they will have the option of paying the loan in full or paying 95% of the balance (if they wish for it to remain in the family). If they're unable to settle the debt with their own funds, the asset must be sold in order to repay the lender. Once the debt is settled, any remaining proceeds will go to the estate.</p> <p>But reverse mortgages are also due whenever you decide to sell the home &mdash; so if your retirement plans involve living anywhere other than your current residence, you'll have to fork over the balance of the loan as soon as you sell.</p> <h3>4. Facing Foreclosure When an Older Spouse Dies</h3> <p>When determining a borrower's eligibility for a reverse mortgage, age is crucial for two reasons:</p> <ol> <li>The borrower must be 62 or older, and<br /> &nbsp;</li> <li>The older a borrower is, the greater the loan amount he or she qualifies for.</li> </ol> <p>For this reason, many couples agree to only include the name of the older spouse on closing documents, not aware that the surviving spouse could face foreclosure if the other dies. According to CFPB, consumers reported that loan originators falsely assured them they would be able to add the younger spouse to the loan at a future date. Make sure you read the fine print and clarify this concern before signing on the dotted line.</p> <h3>5. Difficulty Qualifying for Other Loan Types</h3> <p>Borrowers cannot refinance a reverse mortgage. Reverse mortgages may also have a negative impact on a borrower's ability to qualify for other types of loans. Over time, the accrued interest on reverse mortgages drain any remaining equity in your home. Worse, some homeowners complained that they were unaware of the terms of these types of loans. Before entering into an agreement, seek the counsel of a trusted third-party reverse mortgage professional. Hud.gov offers a directory of HECM counseling agencies, however turning to members of your community to find a referral is recommended.</p> <p>Additionally, the CFPB report mentioned consumer concerns of encountering difficulty when attempting to repay loans. This included lenders failing to keep accurate records, and obstacles when attempting to prevent foreclosure &mdash; such as slow response times (critical during foreclosure), unresponsiveness, and receiving erroneous information or instructions.</p> <p>While a reverse mortgage can be a good source of cash flow during retirement, it nonetheless requires careful consideration for the critical reasons listed above. If you're still interested in a reverse mortgage, do your homework, and understand the resources at your disposal. (For example, on March 2, 2015, The Federal Housing Authority implemented <a href="http://portal.hud.gov/hudportal/documents/huddoc?id=SFH_FHA_INFO_14-66.pdf">new policies to its HECM</a> Financial Assessment to address consumer complaints.)</p> <p><em>Have you considered a reverse mortgage? Why or why not?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/qiana-chavaia">Qiana Chavaia</a> of <a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-avoid-getting-scammed-with-a-reverse-mortgage">How to Avoid Getting Scammed With a Reverse Mortgage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/home-reverse-mortgaged-heres-how-to-sell-it">Home Reverse Mortgaged? Here&#039;s How to Sell It</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">7 Things You Should Know Before Buying a Foreclosed Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing downsides foreclosure HECM retirees reverse mortgages Fri, 15 Jan 2016 14:00:03 +0000 Qiana Chavaia 1638136 at http://www.wisebread.com These Are the 8 Most Common Homebuying Mistakes Foreclosure Experts See http://www.wisebread.com/these-are-the-8-most-common-homebuying-mistakes-foreclosure-experts-see <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/these-are-the-8-most-common-homebuying-mistakes-foreclosure-experts-see" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/house-466373471.jpg" alt="house" title="house" class="imagecache imagecache-250w" width="250" height="200" /></a> </div> </div> </div> <p>As a foreclosure prevention advisor at a Housing and Urban Development (HUD) approved counseling agency, I see my clients suffer the consequences of their homebuying mistakes on a daily basis. Sometimes they are facing foreclosure due to the economy &mdash; job loss or pay reduction &mdash; but a lot of the time it&#39;s because they weren&#39;t prepared to buy a home. Either their credit wasn&#39;t good enough and they signed for a high interest loan they can&#39;t afford, or they don&#39;t have an emergency fund. (See also: <a href="http://www.wisebread.com/what-you-need-to-know-before-buying-your-first-home?ref=seealso">What First-Time Homebuyers Need to Know</a>)</p> <p>Below I&#39;ve listed eight mistakes I see on a regular basis. Read and heed so that when you purchase your first home, you are able to keep it.</p> <h2>1. Forgetting About Other Costs</h2> <p>When you rent a place, you&#39;ll pay rent, utilities, and (hopefully, if you&#39;re smart) renter&#39;s insurance. When you buy a home, you&#39;ll be paying down your principal with interest, property taxes, homeowner&#39;s insurance (which is a lot more than renter&#39;s), utilities (which are probably more, because you&#39;re likely moving into more space), and all maintenance costs. You won&#39;t be able to call your landlord if you have a leaky faucet. You&#39;ll either have to fix it yourself or call a plumber. Keep this in mind when you buy a home, and be ready. Most experts suggest having an emergency fund equal to all of your expenses for six months. And through the actual homebuying process, don&#39;t forget that there are closing costs associated with purchasing a home, including appraisal fee, credit report fee, escrow fee up front, and more. Do your research and save up as much as possible. (See also: <a href="http://www.wisebread.com/9-costly-things-new-homeowners-dont-prepare-for?ref=seealso">Costly Things New Homeowners Don&#39;t Prep For</a>)</p> <h2>2. Falling in Love With a House</h2> <p>I&#39;m obsessed with homes. When I was younger, I used to draw out my home with architecture catalogs. And even now, when I get stressed out, I like to go shopping for homes online. In other words, I understand &mdash; buying a house is fun! But be careful. You could end up going over budget if you get too excited about all the things your house could have. You don&#39;t necessarily need a breakfast nook or a pool. In fact, before you even start looking for a home, it&#39;s best to get pre-approved for a loan. This will tell you exactly how much the bank is willing to lend you. Then, only look for homes in your price range. (See also: <a href="http://www.wisebread.com/how-emotions-can-hurt-a-home-buyer?ref=seealso">Emotions Can Hurt a Home Buyer</a>)</p> <h2>3. Buying a Home You Can&#39;t Afford</h2> <p>This seems obvious, but it&#39;s surprising how many people do this. The mortgage industry considers your mortgage payment to be affordable if it is 31% or less of your gross monthly income. That payment includes principal, interest, taxes, insurance, and HOA fees. But this might not be affordable for your lifestyle. Really sit down and crunch the numbers, and make sure your home fits into your spending habits. Also, if you&#39;re purchasing your home with another person, don&#39;t base the payment on two incomes. Base it off one. That way when something happens, you&#39;ll still be able to make your payments.</p> <h2>4. Not Making a Full 20% Down Payment</h2> <p>When you buy a home, make sure you have a large down payment ready. You want to build up equity before you buy, so that if you decide to sell later, you don&#39;t lose money on the transaction. If you don&#39;t, you might end up paying pricey private mortgage insurance (PMI) every month until your equity is up to 20%. If you do this, your mortgage will be considered risky, which basically means you&#39;re more likely to default on your loan, and your lender requires insurance to cover potential losses. (See also: <a href="http://www.wisebread.com/7-financial-must-haves-for-the-first-time-home-buyer?ref=seealso">Financial Must-Haves for the First-Time Homebuyer</a>)</p> <h2>5. Skipping the Inspection</h2> <p>You&#39;re purchasing a home that you hope will last forever, or at least well past the 30 years it will take you to pay it off. So don&#39;t trust your real estate agent with your entire life. Make sure to get a home inspection by someone you trust. You need to know what you&#39;re getting into so you can prepare. God forbid you&#39;re one year in and your foundation starts leaking or your porch starts to fall off.</p> <h2>6. Buying With Bad Credit</h2> <p>If you have terrible credit, the chances of you getting a good loan product are slim to none. And don&#39;t believe that predatory lending is dead, because it&#39;s definitely still out there. Adjustable rate loans, balloon notes, and high interest rates still exist. If you have terrible credit, contact a HUD-approved counseling agency or seek out credit counseling. Repair your credit first and only then consider buying a home. (See also: <a href="http://www.wisebread.com/how-to-rebuild-your-credit-in-8-simple-steps?ref=seealso">Rebuild Your Credit in 8 Steps</a>)</p> <h2>7. Making Lots of Spendy Credit Activity</h2> <p>Buying a house is exciting, and you might think you also deserve a car. I hate to break it to you, but you don&#39;t. Do not, and I must emphasize this, do not buy a car before you buy a house. Do not take out a credit card. In fact, don&#39;t do anything but pay your bills and save money. Anything you do could affect your credit, and everything will change when you go to close. It could cost you your home.</p> <h2>8. Buying If You&#39;re Not Planning to Stay Put</h2> <p>Homeownership is 30 years. You may want to sell your home quicker than that, and there&#39;s nothing wrong with that &mdash; most American homeowners <a href="http://www.creditsesame.com/blog/how-long-are-americans-staying-in-their-homes/">don&#39;t stay the full 30 years</a>. But if you like moving every year, homeownership isn&#39;t for you. I decided a long time ago it&#39;s not for me. I have anxiety about signing a year lease, so a 30-year mortgage will never float my boat. If this is you, weigh your decision carefully.</p> <p><em>What mistakes have you seen homeowners make? Please share them in comments.</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jennifer-holder">Jennifer Holder</a> of <a href="http://www.wisebread.com/these-are-the-8-most-common-homebuying-mistakes-foreclosure-experts-see">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-4"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/must-watch-video-for-new-real-estate-investors">Must Watch Video for New Real Estate Investors</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-warning-signs-you-cant-afford-that-new-house">9 Warning Signs You Can&#039;t Afford That New House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing foreclosure home buying mistakes homebuying mortgages Mon, 03 Feb 2014 10:48:15 +0000 Jennifer Holder 1122868 at http://www.wisebread.com What Happens at a Foreclosure Auction? http://www.wisebread.com/what-happens-at-a-foreclosure-auction <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-happens-at-a-foreclosure-auction" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/8121906840_d3a626fa68_z.jpg" alt="bidders" title="bidders" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p><a href="http://www.baltimoresun.com/business/real-estate/wonk/bs-re-corelogic-completed-foreclosures-continue-to-decline-20121031,0,4507778.story">Foreclosures have declined recently</a>, but many houses are still being auctioned on courthouse steps across the country. Recently I attended one of these auctions; here is a run down of what happened and what I learned. (See also: <a href="http://www.wisebread.com/the-process-for-purchasing-a-house-with-cash">The Process for Purchasing a House With&nbsp;Cash</a>)</p> <h2>Finding a Foreclosure Auction Near You</h2> <p>Generally the list of houses up for auction are posted at an official building in each county, and many listings are also accessible online through listing services such as <a target="_blank" href="https://www.lpsasap.com/">LPS Agency Sales and Posting</a>. These auctions are also called trustee's sales because the trustee of the mortgage is making the property available.</p> <p>The auction we attended was for Solano County in California, which covers about a dozen cities. We arrived at the Vallejo City Hall a few minutes before the scheduled auction. The auctions happen on the front steps of city hall twice a day. When we arrived, the auctioneer was sitting on the ground filling out forms. A few more people filed in and waited quietly.</p> <h2>The Auction Process</h2> <p>The auctioneer stood up and asked if everyone was ready, and then she started the auction by reading out all the listings that were canceled or postponed. Many houses get taken off the auction block because the banks have worked out a short sale or decided to modify the loan, and cancelations can happen as late as the date of the auction. After she rattled off a dozen numbers and addresses, she finally got to the actual houses for sale.</p> <p>The first house was a 2,000 sq ft property in Vallejo, and the opening bid was $147,000.</p> <p><strong>Bidding Requirements</strong></p> <p>Before bidding, the qualified bidders stepped up to show the auctioneer their money. Basically, you can only bid if you can show that you have cashiers checks that can cover the amount of the bid. The bidders all have hundreds of thousands of dollars in cashiers checks in their pockets. A few people went up with their envelopes and then the bidding began.</p> <p><strong>The Bidding</strong></p> <p>The first bid was for a penny over the opening bid, then bids of $100 and $500 came in from two or three bidders. Finally the house was sold to a bidder for $158,000. After it was sold, the winner and the auctioneer stepped to the side to fill out forms, and the buyer gave the auctioneer a number of cashiers checks adding up to at least the bid amount. Any overage would be refunded later. The whole process took about 10 minutes.</p> <h2>For Buyers With Cash, Savings Are Substantial</h2> <p>During one of the breaks we talked to the winner of the first house. He told us that usually buyers can get 25% to 30% off the market price at auction. For example, the property he purchased for $158,000 was probably worth around $200,000. However, the risk is that buyers can't inspect the inside of the houses they buy, and they are responsible for any liens such as back taxes or unpaid utilities. Buyers also need cash to close the transaction right on the spot. For these reasons, buyers are mostly professional investors or work for bigger companies.</p> <p>After they purchase these houses, they often have to deal with the unpleasant business of evicting the former owners and <a href="http://www.wisebread.com/what-it-really-costs-to-own-a-home">making any necessary repairs</a>. Currently many investors are renting out houses after they buy them. They are planning to sell after the housing market recovers further. The bidder we spoke to works for a company, and he said that he buys one or two houses per day.</p> <h2>Too Many Houses, Too Few Buyers?</h2> <p>In the end only a few houses sold. Many listings went back to the bank because the starting bid was much higher than the current market price. The investors had all done their research, so they did not bid on those properties. The houses that go back to the lender eventually will end up on the open market or will be sold to other investors in batches.</p> <p>It is definitely possible to make money on these properties if you do your research and a lot of legwork in attending auctions in your area. I felt like it was actually much more transparent than <a href="http://www.wisebread.com/how-to-choose-a-real-estate-agent">buying a house from a realtor</a> because everyone knows the bids, and there isn't a lot of competition. The deal also closes right away, so it is a much more efficient process. However, it is definitely not the way to buy a house for those who need a loan or those unprepared to make substantial repairs on their new, formerly foreclosed property.</p> <p><em>Have you thought about purchasing a house at a foreclosure auction?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/what-happens-at-a-foreclosure-auction">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-5"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">7 Things You Should Know Before Buying a Foreclosed Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing auction buying a house foreclosure Wed, 14 Nov 2012 10:36:46 +0000 Xin Lu 955195 at http://www.wisebread.com Farewell to Homeownership: Lessons to Share http://www.wisebread.com/farewell-to-homeownership-lessons-to-share <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/farewell-to-homeownership-lessons-to-share" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/homeowners_sold3.jpg" alt="Family in front of a home" title="Family in front of a home" class="imagecache imagecache-250w" width="250" height="153" /></a> </div> </div> </div> <p>Losing your home is a strange and alienating process. Mine is being lost right this minute, but it&rsquo;s not the end of the world. Here&rsquo;s what happened to me this year, and some advice from what I learned along the way. (See also: <a href="http://www.wisebread.com/how-to-avoid-foreclosure">How to Avoid Foreclosure</a>)</p> <h3>The Long, Slow Demise</h3> <p>The day my neighbor&rsquo;s house &mdash;<o:p> twice the size of mine and renovated &mdash; sold at auction for $65,000, I knew we were in trouble. We paid $189,000 for 1,000 square feet of non-renovated 90-year-old American dream. <em>But</em>, I thought stupidly, <em>it&rsquo;ll come back up</em>. Then, six months later, three more houses in our neighborhood foreclosed. <em>It won&rsquo;t be too bad</em>, I said to myself. Those were old single-wide trailers. They have nothing to do with us. We&rsquo;ve got a gem of a little house on an acre of land. Surely, it&rsquo;ll still be worth something. Then, six months ago, the cute, refurbished, hardwood-everything house I coveted across the way sold at auction for $20,000. It had more bedrooms and baths than mine. We were done for. </o:p></p> <p>I tried all last winter to modify our loan without success. We made too much on one application. Didn&rsquo;t owe enough to other people and weren&rsquo;t behind, so we didn&rsquo;t qualify for another.</p> <p>Then spring hit. Which wasn&rsquo;t spring, really, but a second winter. Record snow. Record rain. The basement, where the posts and piers are, flooded three times. The water table was so high that the bathroom sink no longer drained. The septic, which had been drained and cleaned the summer before when we replaced pipes, was a mess. Contractors and plumbers said good luck with that &mdash; &ldquo;You&rsquo;ve got a year before you&rsquo;re going to have to build a new one up the hill from you.&rdquo; How much would that cost? All three contractors said $60,000. Oh, and did I mention the bathroom is sinking from the wet ground? I did some investigating, and apparently our whole town is built on top of mine caverns. One good earthquake, and it all comes down.</p> <p>Math isn&rsquo;t my strong suit, but even I know that my dinky house, now more than likely worth less than $20,000, is not worth a $60,000 new septic system built on top of a hillside that apparently is just caverns a few feet down.</p> <p>The bank didn&rsquo;t seem to think it was worth fixing either. It was worth it that we pay them our mortgage, but not worth it for them to loan us more or modify it for us to fix it. So earlier this year, we decided to leave.</p> <h3>Can&rsquo;t Happen to Me</h3> <p>It&rsquo;s not like us not to pay our bills. It feels weird. Especially the phone calls. We get them every hour from the mortgage company. Once every two weeks I pick up the phone and talk to them. I tell them the same thing each time &mdash; we are leaving our house because the plumbing issues and foundation issues have left it near to condemned. You wouldn&rsquo;t help us fix it. Soon it will be yours.</p> <p>The representatives are always pleasant. But what can they do? They tell us to apply for <a href="http://www.wisebread.com/how-foreclosure-deed-in-lieu-and-short-sale-affect-credit-scores">deed in lieu</a>. In order for the bank to go for deed in lieu, the house has to be in move-in condition. That doesn&rsquo;t work for a house with winter storm damage needing a new septic. We had been remodeling the kitchen but never finished. They tell us to short sale &mdash; and then they can apply what we make from the sale to the mortgage. No one who lives in our area is going to buy this house. Everyone here knows what the winter did to these houses, and that underneath the house is a cavern waiting for the house to fall in it.</p> <p>Then I asked my lender the big picture question &mdash; which option is better for the home owner? Turns out deed in lieu and short sale are both better for the lender. But for us schmucks in the muck of home-owner disaster, it doesn&rsquo;t matter much. What does bad credit mean in the US of A anymore?</p> <p>So the bank calls me all the time now. I&rsquo;m one of their dead beats.</p> <h3>The Silver Lining</h3> <p>With the savings of not paying the mortgage for a few months, I paid off a credit card, paid off medical bills, and was able to go see my grandfather before he died. None of these things I regret.</p> <p>And there&rsquo;s kind of a happy ending.</p> <p>When I knew we were going to leave our house, I emailed a couple of friends of mine who have rentals. I stated I wanted at least a three-year lease so I wouldn&rsquo;t have to move again soon. I&rsquo;d need time to recover from all this madness. Did they have any open rentals or know a good landlord that did? My credit would be shot. I&rsquo;d need someone who would take us on recommendation that we were decent people who would pay.</p> <p>A friend wrote back. She had left the state but never sold her old house. It had been sitting empty for a couple of years. Beautiful house, but no one around here could afford to buy it, and odds are in the current market she couldn&rsquo;t get what she paid for it. She wasn&rsquo;t planning on selling it any time soon. She also bought a new house and wasn&rsquo;t returning. She&rsquo;d be less nervous about the property if someone was there to take care of it. Did we want to rent her twice-the-size-of-our-old-house, 70-years-younger, completely redone house? Yes, yes we did.</p> <p>I&rsquo;m writing to you from the new house. This feels like one of those &quot;only in America&quot; stories. The new home is in a nice area with lots of forest. The old home had a lovely view of my crackhead neighbor that used to weld in his garage at 3 a.m. Now I just have deer to contend with at night &mdash; a good trade off.</p> <h3>The Lessons for All of Us</h3> <p>It&rsquo;s the community that will help you. It&rsquo;s friends and neighbors with information. So many are suffering and in different stages of losing that we can all tell each other what&rsquo;s going to happen next, which hoop to try, etc. I&rsquo;ve gotten more information from my neighbors during our various yard and <a href="http://www.wisebread.com/how-to-have-a-successful-garage-sale">moving sales</a> than from anyone in an official capacity.</p> <p>If we were a corporation, we wouldn&rsquo;t have thought even twice about cutting our losses and getting out of there. On the books it just doesn&rsquo;t look right. Why put money into a failing investment? My husband and I are too old for that mortgage deal to ever have worked in our favor. We&rsquo;d have been dead by the time we owned it anyhow.</p> <p>Home ownership tends to be emotional, and just like we wrap up our worth in what we do for a living instead our humanity, we wrap ourselves up in our home's success or failure. I, frankly, have had enough of that.</p> <p>Yes, America, I lost my house this year because by and large I was gullible and stupid and many people took advantage of my stupidity and gullibility. Stupidly, I thought that if I owned my own home I&rsquo;d feel like less of a loser. I&rsquo;d feel (there&rsquo;s that emotion again) that I did something right and worthy of approval. I&rsquo;m sure I&rsquo;m not the only one that&rsquo;s fallen into that trap.</p> <p>But if there&rsquo;s any Wise Bread reader out there about to lose his or her home and is freaking out &mdash; don&rsquo;t freak out. We&rsquo;ve all gone home with the wrong guy before. You didn&rsquo;t die, and no one broke up with you for a cute young blonde. You helped yourself get screwed by a big giant corporation. They enjoyed it, and you feel cheap and easy. Get your clothes back on, grab your car keys and go. Hold your head high.</p> <p>I&rsquo;m a happy renter now. I love my landlady &mdash; she&rsquo;s laissez faire about the right things and concerned about the right things. I love living in a house where everything was fixed and up to code. My kids are enjoying the 1,500 extra square feet. I&rsquo;m enjoying paying out 300 less a month for a better house in a nicer neighborhood. Maybe finding a good landlord and a decent rent so that we pursue more important dreams than purchasing homes could be the new American dream.</p> <p><em>Editor's Note: The views shared by one writer does not reflect the views of all writers on Wise Bread. </em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/maggie-wells">Maggie Wells</a> of <a href="http://www.wisebread.com/farewell-to-homeownership-lessons-to-share">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-worst-reasons-to-buy-a-house">4 Worst Reasons to Buy a House</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/17-ways-your-house-can-earn-a-paycheck">17 Ways Your House Can Earn a Paycheck</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-your-house-is-not-an-investment">Stop Thinking of Your House as an Investment</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/rent-your-home-or-buy-heres-how-to-decide">Rent Your Home or Buy? Here&#039;s How to Decide</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-home-buying-habits-we-can-learn-from-millennials">4 Home-Buying Habits We Can Learn From Millennials</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing foreclosure homeownership renting Fri, 09 Sep 2011 09:48:38 +0000 Maggie Wells 529937 at http://www.wisebread.com 5 Tips for Buying a Commercial Short Sale or Foreclosure http://www.wisebread.com/small-business/5-tips-for-buying-a-commercial-short-sale-or-foreclosure <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/articles/5-tips-for-buying-a-commercial-short-sale-or-foreclosure" target="_blank">http://www.openforum.com/articles/5-tips-for-buying-a-commercial-short-sale-or-f...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/5-tips-for-buying-a-commercial-short-sale-or-foreclosure" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000001789325Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="166" /></a> </div> </div> </div> <p>There was a time when snatching up a commercial property through a short sale or a foreclosure involved finding a fixer-upper and then hunkering down for some serious red tape.</p> <p>But with default rates for commercial real estate mortgages skyrocketing in some parts of the country, banks and other lenders are becoming more flexible in working with buyers just to get non-performing loans off their books.</p> <p>&ldquo;In 2006 and 2007, we dealt with virtually no commercial foreclosures,&rdquo; says Adam Von Romer, director of Commercial Capital Advisors in the Fort Lauderdale area. &ldquo;Now, it&rsquo;s one out of every two cases we see.&rdquo;</p> <p>Financial hardships, brought on by changing consumption patterns, increased competition, construction delays or production shifts overseas, can lead a business to default on a commercial mortgage loan. In the end, the lender(s) can either agree to accept less than the full balance of the loan at closing (a short sale), or seize the property through an expensive and time-consuming foreclosure process.</p> <p>In either scenario, an informed buyer can reap substantial savings (in some markets, high-end office condominiums are being offered at 30 cents on the dollar). Nationally, commercial foreclosure filings have jumped by more than 500%, from 3,597 in 2006 to 21,869 in 2010, according to RealtyTrac, a foreclosure listing company.</p> <p>Before diving into an uncertain market, however, you&rsquo;ve got to do some homework.</p> <h3>Become a Detective</h3> <p>Be ready to dig for foreclosures or other commercial properties sold through short sale. Online databases, courthouse listings and legal ads offer some insight. You may try approaching banks, mortgage companies or other financial institutions to inquire about their current listings of foreclosed commercial properties. Good customers with a demonstrated track record and contacts within the institution are generally more successful.</p> <p>For added support, hire an experienced commercial real estate agent as a buyer&rsquo;s agent, who can scope out properties through specialized databases. Make sure to find someone who has connections to lenders and experience working with commercial property short sales and foreclosures. Often, these properties are sold off-market, meaning that they are never formally advertised, says Michael Bull, president and founder of Bull Realty based in Atlanta. A buyer can offer a broker a reasonable fee, which can vary from less than one percent to ten percent of the purchase price, as a commission to find these hidden gems.</p> <h3>Do Your Due Diligence</h3> <p>Even the best bargain can be a flop if it doesn&rsquo;t fit your business objectives.</p> <p>&ldquo;If you&rsquo;re buying it for your business, it needs to be the right property,&rdquo; advises Bull, who also hosts a national talk radio show about commercial real estate and works with nearly 300 lenders handling commercial foreclosures. &ldquo;Don&rsquo;t compromise on that.&rdquo;</p> <p>Determine what the property is worth (the bank likely won&rsquo;t tell you) and its profit potential, paying special consideration to location, access, and visibility. If it&rsquo;s an income-generating property, evaluate the strength of the tenants. Mortgage companies typically require an attornment clause in commercial loans, which safeguards existing tenants against having to sign new leases if a property slips into foreclosure. Avoid questionable lease arrangements, such as when a seller in default executes a 40-year lease for $3 per square foot with his brother-in-law.</p> <p>&ldquo;No matter what else happens, get title insurance,&rdquo; urges Von Romer of Commerical Capital Advisors.</p> <p>Conduct a uniform commercial code search to ensure that any equipment in the building or anything attached to the building is not subject to leases or a chattel mortgage. Check for code violations and open permits.</p> <p>Even more important in a short sale is making sure that no one else can lay claim to the property, since a secondary lien may not be extinguished automatically. In foreclosure situations, get permission from the bank to conduct an inspection and require copies of any environmental assessments performed.</p> <h3>Show Me the Money</h3> <p>Before you buy, you&rsquo;re going to need cash on hand or ready access to cash. &ldquo;People always say location, location, location, but buying a commercial foreclosure is all about timing,&rdquo; says Marcia Mueller, president of Westbrook Realty in Denver. When applying for a commercial foreclosure loan, the lender will require detailed financial records for your business, along with an appraisal, valuation, and inspection of the property. Lenders tend to prefer owner-occupied properties to those backed by investors at a distance.</p> <p>In a bidding war, &ldquo;lenders want to be confident that the horse they picked gets to the end of the race,&rdquo; notes Bull, who recommends that buyers submit a copy of their bank statement or other proof that cash is available, and offer the largest amount of earnest money that they can afford.</p> <p>Von Romer suggests avoiding bidding-up situations entirely. &ldquo;Buyers need to determine their line in the sand and be prepared to walk away,&rdquo; he says.</p> <h3>Skip the Letter of Intent</h3> <p>Once a property is owned by the bank, the opportunity for drawn-out negotiations may evaporate. Rather than compete with five other letters of intent buried on a banker&rsquo;s desk, Bull suggests cutting to the chase and offering your best offer upfront in a purchase and sale contract drafted by a real estate attorney. Sign in blue ink and have it overnighted to those handling the transaction.</p> <p>When you make an offer, know with whom you&rsquo;re dealing. Small community banks worried about staying aflo<span>a</span>t may be more willing to accept lowball offers, while large, affluent banks may prefer to hold on to the property.</p> <p>Consider shortening the contingency period for a more attractive offer. This will depend on the size and price of the property. The inspection period on an eight-unit apartment building might be wrapped up in three days, while it could take more than two months for a mammoth shopping center.</p> <p>The timing of the offer is also important, notes Bull. Banks may be more willing to play ball at the end of a quarter.</p> <h3>Be Patient</h3> <p>In this topsy-turvy market, you may not receive a response from the lender. If the property is worth the time and energy, revisit it a few months down the road and reevaluate its potential. Then, the bank may be in a better (i.e., more desperate) position to sign on the dotted line.<i><br /> </i></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/margie-fishman">Margie Fishman</a> of <a href="http://www.wisebread.com/small-business/5-tips-for-buying-a-commercial-short-sale-or-foreclosure">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-foreclosure-deed-in-lieu-and-short-sale-affect-credit-scores">How Foreclosure, Deed in Lieu, and Short Sale Affect Credit Scores</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">7 Things You Should Know Before Buying a Foreclosed Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Small Business Resource Center business purchase business sale commercial real estate commercial short sale foreclosure short sale small business Fri, 29 Jul 2011 19:30:15 +0000 Margie Fishman 620271 at http://www.wisebread.com How Long Can You Stay in Your Home After You Stop Paying the Mortgage? http://www.wisebread.com/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/godbless.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="200" /></a> </div> </div> </div> <p>Even though the economy seems to be getting better, <a href="http://seekingalpha.com/article/196760-mortgage-delinquencies-continue-to-rise">the number of mortgage delinquencies is still rising</a>. Some homeowners are choosing to walk away because their debts are much higher than what their houses are worth, and many others just cannot afford their mortgages any longer. Although I am not thinking of walking away from a mortgage, I wondered how long those who stop paying their mortgages can live in their homes before the lenders kick them out. Here are some real life examples of people who lived in their homes for months or even years after stopping payment.</p> <h3>Martha Shickley</h3> <p>According to this recent <a href="http://online.wsj.com/article/SB20001424052702303429804575150161178252530.html">Wall Street Journal report</a>, the Shickleys decided to stop paying their mortgage in August, 2009 and have not even received a default notice as of March 2010. That is a whole eight months of free housing and it is not over yet. This family stopped paying because they have an interest only mortgage and is now using their money to pay off other debts.</p> <h3>Ron Nash</h3> <p>This man was featured in the <a href="http://money.cnn.com/galleries/2009/real_estate/0908/gallery.Life_after_foreclosure/3.html">CNN Life After Foreclosure</a> slideshow and he vacated his home after not paying for the mortgage for 18 months. He feels that he &quot;landed on his feet in just about every way.&quot; His mortgage was $5,600 a month and he moved his family into a $1,900 a month rental..</p> <h3>Shawn Aaron</h3> <p>This Florida homeowner stopped paying for the mortgage on his 5,800 square foot home <a href="http://www2.tbo.com/content/2010/apr/02/feeling-entitled-homeowners-walk-away-or-loot-fixt/news-money/">more than two years ago</a>. He says that since his loan was sold to a new lender he doesn't have a contract with the new lender and does not have to pay the mortgage. He even started a company to help homeowners fight banks.</p> <h3>Louis Tondu</h3> <p>This airline mechanic stopped paying in June 2009, and was still <a href="http://realestate.msn.com/article.aspx?cp-documentid=23390500">living in his residence in February 2010</a>. He said his bank has not filed a notice of sale and expects to live there until May 2010.</p> <p>These are just a few of the many homeowners who decided to stop their mortgage payments. Although these few cases are by no means conclusive, the general political and corporate policies of the present are stretching out the length of time people get to stay in their houses after stopping payments. Some homeowners are even <a href="http://www.nytimes.com/2009/03/30/us/30walkaway.html?_r=2&amp;hpw">finding that they were not foreclosed on after they moved out</a> because banks deemed their properties to be too costly to take back.</p> <p>Recently Paul Michael of Wise Bread wrote about <a href="http://www.wisebread.com/citimortage-told-me-to-default-on-my-loan-if-i-want-their-help">his thoughts on walking away from his mortgage</a>, and if he really does it I would be interested to read about how long it takes the bank to actually get to the stage of eviction. Are you more likely to walk away from your underwater <a href="http://www.wisebread.com/redir/mortgagerates">mortgage</a> knowing that you could possibly live in the home for another two years?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-paying-off-your-mortgage-early-costing-you-money">Is Paying Off Your Mortgage Early Costing You Money?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-great-reasons-for-paying-off-the-mortgage-on-your-home">6 Great Reasons for Paying off the Mortgage on Your Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/buy-the-same-house-twice-for-less-than-buying-it-once">Buy the Same House Twice for Less Than Buying It Once</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/things-i-wish-i-knew-before-i-bought-my-second-house">Things I Wish I Knew Before I Bought My Second House</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing foreclosure mortgage real estate Tue, 06 Apr 2010 14:00:06 +0000 Xin Lu 6233 at http://www.wisebread.com How Foreclosure, Deed in Lieu, and Short Sale Affect Credit Scores http://www.wisebread.com/how-foreclosure-deed-in-lieu-and-short-sale-affect-credit-scores <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-foreclosure-deed-in-lieu-and-short-sale-affect-credit-scores" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/foreclosure_0.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Currently millions of Americans are delinquent on their home loans or facing foreclosure. Foreclosure, deed in lieu of foreclosure, and short sales are several ways for borrowers to get out of a mortgage that is no longer affordable. Here is a quick guide to what these options are, and how much they could affect one's <a title="Wise Bread's Guide to Credit Scores" href="http://www.wisebread.com/debt/credit-scores">credit score</a>.</p> <h2>Foreclosure</h2> <p>A foreclosure happens when a borrower has defaulted on a property and the lender claims ownership of the property. Usually lenders start the foreclosure process after three missed payments. The property would then be sold at a public auction. The impact of the foreclosure to a borrower's FICO score is around 200 to 300 points if you include the effects of the missed payments. A foreclosure stays on your credit report for seven years.</p> <h2>Deed in Lieu</h2> <p>A deed in lieu of foreclosure is where the borrower gives the deed back to the lender with the lender's approval. The lender also forgives the remaining balance on the loan. The borrower still loses the home. It depends on how the lender reports this to your credit report but the credit drop could be as large as a real foreclosure and the record would stay for seven years. If your lender does accept a Deed in Lieu then you could try to negotiate with them to not put a foreclosure notification in your credit record, but if you had late payments your credit would still be affected.</p> <h2>Short Sale</h2> <p>This is not exactly a foreclosure, but a deal with the lender to sell a home for less than what is owed. Basically the borrower has to find a buyer who is willing to purchase the home at a price approved by the bank. The credit impact depends on how many late payments there are. If a short sale is completed without any late payments then the credit impact would be much less than that of a foreclosure. If the borrower accrues a significant amount of late payments during the short sale then the credit impact could still be as much as 200 points.</p> <p>If you have to default on your mortgage, just remember that losing a home is not the end of the world and credit can be rebuilt. It generally takes two to three years for someone who went through one of the above events to qualify for another home loan. If a borrower keeps payments current on obligations other than the mortgage then the foreclosure would be an isolated negative event and that would not be indicative of a history of bad credit. This is why those who strategically walk away from their homes keep current on their credit cards and other loans because they can get back their &quot;prime&quot; credit score fairly quickly.</p> <p><em>Have you gone through one of these events? How did it affect your credit score?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/how-foreclosure-deed-in-lieu-and-short-sale-affect-credit-scores">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage">How Long Can You Stay in Your Home After You Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-questions-to-ask-before-applying-for-a-heloc">5 Questions to Ask Before Applying for a HELOC</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">7 Things You Should Know Before Buying a Foreclosed Home</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/is-a-buying-a-foreclosed-home-ever-a-good-idea">Is Buying a Foreclosed Home Ever a Good Idea?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-downsides-of-a-reverse-mortgage">5 Downsides of a Reverse Mortgage</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit report deed in lieu foreclosure real estate short sale Fri, 13 Nov 2009 15:00:02 +0000 Xin Lu 3824 at http://www.wisebread.com Tips for Avoiding a Foreclosure Prevention or Loan Modification Scam http://www.wisebread.com/tips-for-avoiding-a-foreclosure-prevention-or-loan-modification-scam <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/tips-for-avoiding-a-foreclosure-prevention-or-loan-modification-scam" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/foreclosure.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>Rising home loan delinquencies and foreclosures have made con artists very&nbsp; busy.&nbsp; These scammers use the public records to find homeowners who are in trouble, and then use a variety of schemes to take the homeowners'&nbsp; money and property in the name of helping the homeowner avoid foreclosure.&nbsp;&nbsp; If you have late payments on your home loan then it is likely that you will be targeted. The following are some warning signs that you are dealing with a possible scammer.</p> <p><strong>Unsolicited contact </strong>- If you receive an unsolicited call or letter promising help, verify that the person promising help is actually from your lender or servicer.&nbsp; Technically only your lender or servicer has the power to modify your loan.&nbsp; Scammers use the public records to find out the default status of homeowners, and some of them<a href="http://www.latimes.com/news/local/la-me-mortgage-fraud6-2009jul06,0,6867637.story"> pretend to be the lender holding the lien</a>.&nbsp; However, you can usually verify if the offer for help is real by contacting your lender's public customer service line.<br /> <strong><br /> Pretending to be from the government</strong> - We all know that there has been several federally sponsored <a href="http://www.wisebread.com/details-of-obamas-mortgage-plan-released-will-you-benefit">loan modification</a> and <a href="http://www.wisebread.com/the-more-questionable-aspects-of-the-housing-bailout-bill">bank&nbsp; bailout programs</a>.&nbsp; However, these programs ask homeowners to contact their lenders for help.&nbsp; If you receive unsolicited contact from someone saying they are affiliated with the government then it is a warning sign it's a scammer trying to sound legitimate.</p> <p><strong>Great promises </strong>- Con artists are usually very good salesmen, and many of them promise that they can get the homeowner out of trouble with certainty.&nbsp; If it sounds too good to be true it usually is.</p> <p><strong>High pressure </strong>- If the nice promises do not work, some scammers go straight for the vulnerability of those in trouble.&nbsp; For example, they would ask a person if they really want to live on the streets.&nbsp; If you feeling pressured or threatened by someone promising to help then it is a sign to walk away.</p> <p><strong>Advanced fees&nbsp; </strong>- If a company asks you for a few thousand dollars to start&nbsp; the process, it's most likely a scam.&nbsp; When a legitimate lender modifies or refinances your loan they add up the costs at closing. Once you hand over the advanced fee there is really no guarantee that the company will do anything. There are legitimate housing counselors that charge fees for their services, but consumers should make sure that they have actually received the services before paying.</p> <p><strong>Diverted mortgage payments</strong> - Some scammers tell a troubled homeowner that they already negotiated a lower mortgage with the lender and that the homeowner should send the lower payment to the scammers instead of the lender. Even though this scheme is fairly easy to verify through the lender, sometimes troubled homeowners do not figure out that the lender is not receiving any money until months later.</p> <p><strong>Suspicious advice</strong> - Scammers often give advice such as &quot;stop talking to your lender&quot; or &quot;you are not obligated to pay your loan.&quot;&nbsp; They want the troubled homeowner to talk to them only.&nbsp; Make sure to communicate with your actual lender.</p> <p><strong>Property transfer</strong> - Many scammers ask troubled homeowners to sign over the property so that they could make the mortgage payments.&nbsp; The fact is that the scammers do not have to make mortgage payments on the property, and often times they use the properties to defraud&nbsp; lenders.</p> <p><strong>Power of attorney </strong>- Some scammers ask troubled homeowners to sign over the power of attorney to another person.&nbsp; This basically allows them to act on the homeowner's behalf on many legal documents.&nbsp; Giving away the power of attorney is actually worse than signing away the home.</p> <p>If you suspect that you are being scammed you should definitely report the details to the <a href="https://tips.fbi.gov/ ">FBI </a>or the <a href="http://www.ftc.gov/bcp/ ">FTC</a> as well as your local consumer protection agencies.&nbsp; If you really need help dealing with your lender then there are <a href="http://www.hud.gov/offices/hsg/sfh/hcc/hccprof14.cfm">legitimate housing couselors available at the HUD </a>and their services do not cost thousands of dollars.&nbsp;</p> <p><em><strong>Have you been contacted by a scammer or have you been scammed?&nbsp; What did you do?&nbsp; </strong></em></p> <p>&nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/tips-for-avoiding-a-foreclosure-prevention-or-loan-modification-scam">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/must-watch-video-for-new-real-estate-investors">Must Watch Video for New Real Estate Investors</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-vicious-home-rental-scam-dont-get-conned">The vicious Home Rental Scam – don’t get conned.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-can-renters-do-if-their-landlords-are-in-foreclosure">What can renters do if their landlords are in foreclosure?</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/five-quick-and-simple-scams-that-could-happen-to-you-today">Five quick and simple scams that could happen to you today</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-things-you-should-know-before-buying-a-foreclosed-home">7 Things You Should Know Before Buying a Foreclosed Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Consumer Affairs Real Estate and Housing foreclosure loan modification scam Fri, 10 Jul 2009 16:00:09 +0000 Xin Lu 3372 at http://www.wisebread.com What can renters do if their landlords are in foreclosure? http://www.wisebread.com/what-can-renters-do-if-their-landlords-are-in-foreclosure <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-can-renters-do-if-their-landlords-are-in-foreclosure" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/eviction.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="333" /></a> </div> </div> </div> <p>Lately many tenants across the United States who faithfully paid their rents on time were surprised to find eviction notices tacked on their doors because their landlords have not been paying the mortgage.&nbsp; Other tenants are receiving &quot;cash for keys&quot; offers from the banks that reposessed the homes.&nbsp; If you are a renter, here are some precautions you can take to make sure you do not face an unexpected foreclosure related eviction and also a few tips on what to do if your landlord is losing the home you live in.</p> <p>If you are living in a rental home now in a state with a high rate of foreclosure such as Nevada, Florida, or California, then you should definitely check the public records for any liens or judgments on the home you live in.&nbsp; Fortunately, many counties now have land and tax records online.&nbsp; For example, for San Mateo County you can simply search for &quot;San Mateo Tax Assessor&quot; and find the Tax Assessor's homepage.&nbsp; From there you can search for a specific address and see if the taxes are paid ontime.&nbsp; If the taxes are late or in default on the property, then that is a warning sign that the property may be in financial trouble.&nbsp; You can also search the land records to find any Notice of Defaults, which is usually the first step in a foreclosure in California.&nbsp; If public records are not available online where you live, then you could go to the county seat and search for the record at the county offices.&nbsp; Public records are available to anyone, but some offices charge a small fee to do a search for you.&nbsp; You can also find detailed information such as which bank holds the mortgage on the home, and what the mortgage amount is.</p> <p>Another way to check if the home you are renting is in financial trouble is by searching the local real estate listings.&nbsp; It is possible that your home is on the market as a short sale and your landlord did not inform you.&nbsp; If that is the case then the home is probably about to foreclose.</p> <p>If there is any sign of financial distress then it may be a good idea to speak to your landlord and ask what is going on.&nbsp; If your landlord tells you everything is okay when there is a Notice of Default in the public records, then he or she may not be completely honest with you and it is probably a good idea to find a new place and get your security deposit back.</p> <p>If you already received a &quot;cash for keys&quot; or eviction letter from the bank then you should also check the public records to see if the bank already owns the home.&nbsp; If the bank is indeed the recorded owner then you should definitely stop paying your old landlord rent.&nbsp; At this point you could either pack your bags or try to negotiate with the bank.&nbsp; Some banks may prefer to have occupied homes because they are less likely to be vandalized so in rare instances they are willing to sign new leases, but you still have to be ready to leave when the home sells.</p> <p>Eviction laws also differ from state to state so in some cases it is worthwhile to fight a foreclosure related eviction.&nbsp; <a href="http://www.thecrimson.com/article.aspx?ref=525883">In this article from the Harvard Crimson</a>, a group called No One Leaves is helping renters in Boston stay in their homes and get settlements from banks because in Massachusetts foreclosure is not legal grounds for eviction.&nbsp;&nbsp;&nbsp; However, this is not true in every state so you must research if a legal battle is worthwhile for your situation.&nbsp; Fighting an eviction also makes a renter undesirable to other landlords in the future even if the renter wins so you must make sure that you are willing to take that risk.&nbsp; <br /> &nbsp;</p> <p>The good news is that the powers that be are realizing that these unjust and surprising evictions are becoming problematic for many communities.&nbsp; In July California passed a law that gives tenants a 60 day notice to leave a rental unit after the property is sold in foreclosure, and yesterday <a href="http://www.nytimes.com/2008/12/15/business/15evict.html?em">Fannie Mae announced that it will not evict renters in the foreclosed homes it owns</a>.&nbsp;&nbsp;&nbsp; Hopefully other banks will follow suit and keep the good renters in their homes as long as they need. For now, if you are a renter, remember to protect yourself by verifying the ownership and financial status of a home through public records. Since landlords usually run credit checks on tenants, I think it is only fair for renters to find out the financial situation of their landlords.&nbsp; Hopefully in the future landlords will be required to disclose their financial troubles for the benefit of renters.</p> <p><em><strong>Have you been evicted due to your landlord's failure to pay mortgage?&nbsp; What did you do?</strong></em><br /> &nbsp;</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/xin-lu">Xin Lu</a> of <a href="http://www.wisebread.com/what-can-renters-do-if-their-landlords-are-in-foreclosure">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/20-tips-for-getting-your-security-deposit-back">20 Tips for Getting Your Security Deposit Back</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/could-the-last-person-to-leave-america-please-turn-out-the-light">Could the last person to leave America please turn out the light.</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/making-home-affordable-expanded-again-borrowers-allowed-to-refinance-loans-up-to-125-percent-of-valu">Making Home Affordable expanded again - borrowers allowed to refinance loans up to 125 percent of value</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-check-if-your-mortgage-statement-is-correct">How to check if your mortgage statement is correct</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/are-the-new-home-appraisal-rules-good-for-consumers">Are the new home appraisal rules good for consumers?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Consumer Affairs Real Estate and Housing eviction foreclosure landlord renter Mon, 15 Dec 2008 20:53:01 +0000 Xin Lu 2649 at http://www.wisebread.com Should We All Just Stop Paying the Mortgage? http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/should-we-all-just-stop-paying-the-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/relax-4492310-small.jpg" alt="tossing papers" title="tossing papers" class="imagecache imagecache-250w" width="250" height="167" /></a> </div> </div> </div> <p>I&#39;ve been recovering from surgery recently, so that has given me the opportunity to do a lot of thinking on my sick bed. And with the recent turmoil in the economy, plus a focus on the housing market, I couldn&#39;t help a certain thought from bubbling up in my mind day after day. It&#39;s not responsible; it&#39;s not even fair; but I do have to wonder&hellip;should we all just stop paying the mortgage? (See also: <a href="http://www.wisebread.com/how-to-refinance-your-mortgage">How to Refinance Your Mortgage</a>)</p> <p>From what I understand, the $700 billion bailout plan has some provisions in it that will help struggling homeowners. John McCain also recently talked about using $300 billion of that money to &quot;buy back&quot; bad mortgages to help the struggling homeowner negotiate a decent, fixed rate. They may even renegotiate the cost of the mortgage, so you only pay what your home is now worth, not what you actually owe. Sounds great, right?</p> <p>But it got me thinking&hellip;what about the people who did everything right? Take someone I know well &mdash; me. I bought my house almost seven years ago. I stayed well within my means and avoided any adjustable rates or sub-prime loans. I got myself a nice, traditional 30-year fixed mortgage at a good rate. I even got the homebuilder to pay the closing costs without rolling them into my loan.</p> <p>Now, after being a homeowner for seven years, I am proud to say that I have NEVER missed a mortgage payment. Ever. Sure, times were tough on occasion. Sometimes I would pay the mortgage a few days late because there just wasn&#39;t enough cash in the bank. But the mortgage was paid, even if it meant staying home every night and eating Ramen occasionally.</p> <p>What&#39;s more, I never used my home as a bank account. Even when the home was worth more than we paid for it (ahh, remember equity?) I never refinanced. I never got a home equity loan. I just stayed the course, knowing that after about five years my growing family would have some ready funds available to upgrade to a bigger home. (See also: <a href="http://www.wisebread.com/things-i-wish-i-knew-before-i-bought-my-second-house">Things You Should Know Before You Buy Your Second Home</a>)</p> <p>Well, all those plans were shattered. Now, my home is worth 15% less than I paid for it. I will be lucky if I break even when I sell it, considering the dreadful market and the associated costs involved in selling a house. My wife and I are even thinking of renting it out, and renting a bigger place for ourselves. With the market the way it is, we can rent a house twice the size of ours for the same price as the mortgage.</p> <p>But here&#39;s the big question. Should we just stay in the house and stop paying the mortgage completely? <a href="http://www.signonsandiego.com/uniontrib/20081010/news_lz1e10schiff.html">An article I recently read by Peter Schiff </a> seems to confirm my thinking. Let&#39;s look at the pros and cons. First, if we stop paying the mortgage we know we won&#39;t be kicked out. There will be a moratorium put on foreclosures, so we could quit paying our largest bill and put that money in the bank, ready to use to buy a new home.</p> <p>Second, as we have now stopped paying our mortgage we would fall into the category of &quot;struggling homeowner.&quot; Which means, ladies and gents, that the government will swoop in and help us out! Yep, as unfair as it sounds, we&#39;ll get help if we suddenly become irresponsible. My mortgage would be renegotiated, probably at a lower rate, and for the current price of my home. Plus, I&#39;ll have saved thousands on mortgage payments until that happens. It could take six months&hellip;that&#39;s around $10,000 we&#39;ll have saved.</p> <p>The only downside I can see would be a tarnished credit rating. But so what? For the amount of money I&#39;m saving, it seems well worth it. And I&#39;ll still keep my house. (See also: <a href="http://www.wisebread.com/10-surprising-ways-to-negatively-affect-your-credit-score">10 Surprising Ways to Hurt Your Credit Score</a>)</p> <p>This is wrong. I will, no doubt, keep paying my mortgage. But I cannot help but be angered by this whole system. It is rewarding people who made bad, bad choices. No&nbsp;one forced anyone to buy a home way bigger than they could afford. No&nbsp;one put a gun to Joe Schmo&#39;s head and said &quot;Hey, sign this, take a huge mortgage and do it with an adjustable, interest-only rate.&quot; And yet those guys, the ones who bit off way more than they could chew, are now going to get help. They get to keep their big house and pay a nice new low-rate mortgage. They don&#39;t even have to pay back the money they didn&#39;t pay on mortgage payments.</p> <p>Now, there are exceptions to the rule. People who lost their jobs and couldn&#39;t pay the mortgage, they genuinely need the help. People who got sick and had massive medical bills to pay, fair enough. But for the average greedy speculator who bought too much house with no money down and a sharply rising interest rate&hellip;well, in my opinion, that person should have to live with the consequences. I have my own problems, as do many of you. But why should my hard-earned taxes bail out the irresponsible segment of our society? It&#39;s complete BS.</p> <p>The one reason I&#39;ve been given is that we need to help these people, or our home values will suffer. But the market has pretty-much bottomed out anyway. So, that&#39;s no consolation to me. No, I&#39;m mad as hell and I just can&#39;t think of a better way to prove it than to stop paying my mortgage and get in on this nationwide handout. How about you?</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/paul-michael">Paul Michael</a> of <a href="http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/mortgage-bailout-redux-new-incentives-for-modifying-second-mortgages-in-the-se-cond-lien-program">Mortgage bailout redux: new incentives for modifying second mortgages in the Second Lien Program</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-secrets-to-refinancing-an-underwater-mortgage">7 Secrets to Refinancing an Underwater Mortgage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-long-can-you-stay-in-your-home-after-you-stop-paying-the-mortgage">How Long Can You Stay in Your Home After You Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/citimortage-told-me-to-default-on-my-loan-if-i-want-their-help">CitiMortgage Told Me to Default on My Loan</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing bailout Economy foreclosure mortgage refinance Thu, 16 Oct 2008 15:42:00 +0000 Paul Michael 2524 at http://www.wisebread.com Must Watch Video for New Real Estate Investors http://www.wisebread.com/must-watch-video-for-new-real-estate-investors <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/must-watch-video-for-new-real-estate-investors" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000008950887_Large.jpg" alt="foreclosure notice" title="foreclosure notice" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p class="MsoNormal"><strong>Note: Video is no longer available.</strong></p> <p class="MsoNormal">Casey Serin is a 24-year-old real estate investor who is $2.2 million in debt.<span> </span>Last year, Serin bought eight houses in four states and now he can&rsquo;t afford the mortgage payments for any of them.<span> </span></p> <p class="MsoNormal">Even though Serin is in danger of losing all of his property, that is not even his biggest problem.<span> </span></p> <p class="MsoNormal">You see, he might be going to jail.</p> <p class="MsoNormal">Serin lied on several of his loan applications and talked candidly about these &ldquo;liar loans&rdquo; on his blog, I Am Facing Foreclosure.<span>&nbsp;</span>When friends warned Serin about the danger of confessing his fraudulent activities online, Serin tried to take the blog off the Internet, only to find out that Google has already cached it.</p> <p class="MsoNormal">This is not the first time Serin got screwed by Google.<span> </span>In one of his first attempts to secure a loan, the lender actually Googled Serin to see if his application was truthful (it wasn&rsquo;t).<span> </span></p> <p class="MsoNormal">While Serin&rsquo;s application painted a rosy picture of his financial status, his blog truthfully revealed that he has several properties and is having problems with many of them.<span> </span>Serin, who is a website developer, said he thought he had blocked search engines from indexing his blog, and that the lender&rsquo;s investigators must have a backdoor way of getting around such security measures.</p> <p class="MsoNormal">Lying on a mortgage application is a federal crime.<span> </span>It is an act of bank fraud, wire fraud, and mail fraud.<span> </span>&ldquo;This can results in jail time,&rdquo; said Joseph Falk of the national Association of Mortgage Brokers.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/will-chen">Will Chen</a> of <a href="http://www.wisebread.com/must-watch-video-for-new-real-estate-investors">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/whats-faster-for-mortgage-payoff-100-month-extra-or-1-payment-year-extra">What&#039;s Faster for Mortgage Payoff: $100/Month Extra or 1 Payment/Year Extra?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-times-its-actually-okay-to-be-underwater-on-your-home">6 Times It&#039;s Actually Okay to Be Underwater on Your Home</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-whats-included-in-a-homes-closing-costs">Here&#039;s What&#039;s Included in a Home&#039;s Closing Costs</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-benefits-of-carrying-a-mortgage-into-retirement">5 Benefits of Carrying a Mortgage Into Retirement</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-things-lenders-look-for-in-a-loan-application">5 Things Lenders Look For in a Loan Application</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Consumer Affairs Real Estate and Housing casey serin foreclosure loans lying mortgages Wed, 06 Dec 2006 16:32:04 +0000 Will Chen 49 at http://www.wisebread.com