If you are one of the many Americans who are feeling the pressure in your wallet to choose between which bills to skip this month, you are not alone. Some people choose to skip the mortgage payment. But before you make that final decision, there are several items you should take into account regarding what happens when you do that.
First of all, since your mortgage is a much bigger loan than a credit card, skipping your mortgage payment takes a much higher toll on your credit score. While your score won’t be affected if your payment is under 30 days late, any missed payment after 30 days is disastrous. Your lender will immediately notify the credit bureaus and your late payment will reflect on your credit history.
You may not think too much into this if you aren’t planning on applying for any other loans or opening another credit card, but this hit to your credit score may produce a ripple effect. Because credit companies periodically check into your credit score, they may see your failure of payment as a risk to them. In return, they may increase your interest rate or lower your credit limit.
But your creditors aren’t the only ones who may act. Your mortgage lender may also begin enacting underlying clauses that have been written into the contract that you are not aware of. And while you will incur a late fee and most likely won’t go into foreclosure for one missed payment, your lender may begin foreclosure procedures after the third missed payment.
To prevent any of this, if you feel you are not able to make a payment on time or during the grace period, it is important to contact your lender. In most cases, they will be able to make arrangements with you to keep your mortgage current and on track.
With the recent housing crisis, more people started asking whether buying or renting a home is the better option. While the housing market is on the rise, buying still might not be your best option. Or maybe it is. Before you decide on whether to buy or rent your home, take these pros and cons into consideration.
When you buy your home, you become your own landlord. Not only will you be allowed to do whatever you choose with the property (taking homeowner association laws into consideration), purchasing your home allows you the stability of knowing that you won’t have to move unexpectedly should a problem arise with the property or the lease runs out.
On the other hand, things happen. Maybe you aren’t settled into your career, you’re still looking for a life partner, or you are hoping for a promotion that might send you elsewhere. Having a lease allows you the freedom to move about as you wish. It also prevents you from having additional costly expenses.
Many people believe that paying off their mortgage is the equivalent of paying rent, except they receive an asset in exchange. While this is true, there are several costs involved in owning a home including closing costs, regular maintenance, lawn care, home repair, bills, insurance, and home improvements and upgrades. When you rent a home and your refrigerator stops working or you have a leak, your landlord is responsible for purchasing and replacing the appliance or paying for the plumber to come and make the proper repairs.
Depending on your situation, it may be easy to decide the best option. But if you still aren’t sure and you are financially concerned, it is recommended to calculate the Price to Rent ratio (P/R ratio) by finding two similar houses, condos, or apartments (one for rent and one for sale) and dividing the sale price by the annual rent. As the P/R ratio climbs, it becomes more reasonable to rent, especially if the ratio reaches or exceeds 20.
Still not sure? Head to the New York Times ‘Is it Better to Buy or Rent’ calculator and plug in the numbers.
Losing your house to foreclosure can be a terribly challenging and upsetting time for homeowners. But just because the home went up for foreclosure doesn’t mean you have to just walk away from it. Did you know that you can actually bid on your own property at a foreclosure sale?
You may be wondering, if this is true, why don’t more people do it? Well, it’s actually not that difficult to explain. When you bid on a home, sometimes you are expected to have the cash upfront to pay for the home in as little time as 24 hours. And the cost of the foreclosed home can actually turn out to be more than what the homeowner paid.
A first mortgage foreclosure starting bid not only includes all monies owed by the previous owner, but also the cost of foreclosure, the interest on defaulted payments as well as any fees that were not paid or were owed due to defaulting on a loan. So while it is possible to bid on your own home, the starting bid is often too high for many homeowners to be able to acquire cash for. But it can be done.
It is no secret that the housing market in recent years fell into a crisis. This is nothing new. And while home values slowly begin to increase and less homeowners are finding themselves with underwater mortgages, the market is still being flooded with foreclosures. This continues to plague the housing market, which is vital to the nation and the economy. So what is the government doing to offset this?
When President Obama was elected into office, he made several proposals to help relieve the strain on the housing market. Two of these are the Home Affordable Modification Program and the Home Affordable Refinance Program. How do these work?
The Home Affordable Modification Program or HAMP aids current homeowners in lowering their monthly mortgage payments while the Home Affordable Refinance Program or HARP allows homeowners who are current on their mortgage payments but may have been denied refinancing of their mortgage based on the drop of the home value to refinance through HARP.
Other programs that are available include:
Principal Reduction Alternative or PRA
The program works to lower monthly payments by working with lenders to reduce the principal based on the significantly lower home value.
Loans guaranteed by the government given to veterans of the U.S. Armed Forces for the purchase of a home. This loan may also be available to spouses of deceased veterans in certain circumstances.
Home Affordable Unemployment Program or UP
This program allows those that are unemployed and struggling to make mortgage payments to receive a temporary deduction or a suspension of payment for up to twelve months while they seek re-employment.
Home Affordable Foreclosure Alternatives or HAFA
Rather than foreclose on the home and clog up the market any further, this program allows incentives for homeowners to opt for a short sale or deed-in-lieu of foreclosure.
Stephen K. Hachey, a Florida real estate attorney, can help you navigate this process and make the most of a difficult situation. Contact him at 813-549-0096.
Anybody who attempted to apply for a loan prior to 2010 knows how vague and difficult it used to be to apply for a loan. With hidden fees and surprise increases that could come months later, it was difficult to make comparisons between different mortgages. But as of January 1st, 2010, this ability to make comparisons became easier thanks to the Good Faith Estimate.
The Department of Housing and Urban Development now requires all lenders and brokers to supply applicants with a standardized form within three business days of the lender or broker receiving the application. What does this do? Not only does it hold the lenders and brokers more accountable for the loan offers and costs, but it aids the borrower in understanding what they are really getting in to.
With the reduction of vague wording, borrowers are now able to clearly read the main features of the loan including the amount, term, initial interest rate and total monthly payment. All of the questions that borrowers of yesteryear use to wonder are now in simple terms. Are you worried that your interest rate or your loan balance may rise even if you are making payments on time? Is it possible for your monthly payment to rise? Borrowers today no longer have to worry with the Good Faith Estimate because all of these questions are answered on the first page.
And it gets better. You no longer receive an itemized list of charges that may have confused you before. Now you get one sum of the fees and you are now able to see which charges are coming from the lender and which are coming from third parties. Are you using a mortgage broker and concerned about how much he is getting paid? You no longer have to worry about this since the form also lays that out in black and white for you as well.
When you begin taking on a lot of rental properties, it can become overwhelming. You may want to turn to a property management company to help you handle the properties, but because these properties are large assets, you can’t just trust anybody with them. So how do you find a great company to trust?
First ask for referrals. Chances are, you know somebody who is happy with their property management company. Next, interview them. Just because somebody else is happy with the company doesn’t mean the company fits all of your needs. You also don’t want to base your choice on the price. Of course this is going to be a factor, but this choice should come after you’ve gotten all of your questions out of the way and you’ve have made sure there aren’t any hidden fees.
Begin by asking about the fees and ensure they all make sense to you. Nobody likes hidden fees. Next, ask the following questions:
How many units do they currently manage and what type of property are they? You don’t want to hire a company for an entire apartment complex if they usually deal with single family homes.
How long have they been in business? Never consider hiring anybody who has been in business less than a year.
What percentage of fees do they collect and how do they handle taxes? Do they keep the late fee or do you receive this?
What is the cost of the eviction process from start to finish?
How do they advertise your vacancies? What is the average length of time properties stay vacant? Who pays for advertising?
Is there a cost to the landlord for new leases signed? What are the lease options?
How are tenant calls handled? Do they have emergency hours on the weekend? How does the company handle repairs and maintenance?
After you have reviewed these elements of each company, make sure to thoroughly read the entire contract. Never sign a contract without asking any questions you feel you are important.
When you hear people talking about getting a mortgage for a new home, it seems simple right? A mortgage is a mortgage and the hardest part is getting approved for a low rate. But that is not entirely true. There are actually several different types of mortgages.
This one should be obvious. You pay the same interest rate over the entire term, which can range from 15, 20 or 30 years. While this might seem like a nice deal, take into account that if interest rates fall, you will still be stuck with the higher rate.
Adjustable-rate (ARM) or variable-rate mortgage
An ARM is just a broad subheading for all of the adjustable-rate mortgages that are out there. Although it may differ depending on the year, they are all fairly similar. After a period of a fixed rate, the interest rate changes based on a schedule.
FHA (Federal Housing Administration) Loan
These loans are insured by the government, particularly the Department of Housing & Urban Development. They do not guarantee or make loans, however the insurance lowers the risk of default for the lenders. It allows individuals to qualify for a loan even if their FICO score is poor.
Unlike the FHA, the VA loan is a government loan offered to veterans who have served in the U.S. Armed Services. It may also be acquired by spouses of deceased veterans in specific cases.
A balloon mortgage is very similar to a fixed-rate mortgage, however the payments are lower due to a large balloon payment made right at the end of the loan term.
The title is slightly misleading. These loans allow for an option to make an interest-only payment for only a short amount of time.
Individuals must be 62 years old or older with enough equity to receive this loan. Essentially, rather than making monthly payments to the lender, the lender makes monthly payments to the borrower as long as they live within their home.
Combo/Piggyback Mortgage Loan Types
When the down payment is less than 20 percent, the borrow takes out two loans: They may be either fixed-rate, adjustable-rate or the combination of the two. This helps to avoid paying private mortgage insurance.
Underwater Mortgage. It’s a situation nobody plans for and everybody hopes to avoid. But with the recent downturn in the economy and the burst of the housing bubble, many Floridians are still facing the problem today. Thankfully, the number of home owners owing more in mortgages than their house is worth—hence underwater—is becoming less, but unfortunately not by much. In 2011, the number of underwater mortgages in Florida was between 42 and 47 percent. Florida trailed behind Nevada and Arizona in the top three with the highest rate of underwater mortgages. By the end of last year, this number had dropped to around 40%. As the housing market continues to rise, many are seeing the value of their home rise. But is it enough? What do you do with an underwater mortgage?
You have plenty of options. You have to do what is best for you. You could reach out to your lender for help. Many are surprised to find their lender will help them with options so they can keep their house. Lenders do not want to deal with foreclosures either. They will help you find a way to continue paying your mortgage monthly to avoid any negative impact on your credit score.
You also have the option of a short sale or selling your house for a lesser value than what is owed on the mortgage. If you find yourself in a complete financial disaster, you also have the option of filing for bankruptcy.
Whichever you choose, the most important step to take when you find yourself underwater is continuing to make monthly payments and reaching out to your lender for help. It never hurts to ask.
A real estate attorney can also give guidance in this situation. Stephen K. Hachey, a Florida real estate attorney, that can help you navigate this process and make the most of a difficult situation. Contact him at 813-549-0096.
As the price of real estate companies continues to rise, more homeowners are opting for sale by owner rather than hiring a professional. While this isn’t extremely difficult, there are several items to take into consideration after you have chosen this option. Here are some tips and tricks to help you along the way.
One of the most important aspects of selling your own home aside from actually selling it, is making sure it is done legally. Since you don’t have an agent to insure it is all done properly, you want to make sure you hire a licensed inspector as well as a licensed real estate appraiser. You also need to make sure you get the title transferred properly. Each state or city might have it’s own set of laws regarding the transfer of property. These include legal documentation in the real estate records.
Review and hire a proper real estate lawyer for this and ensure they read over the contract for sale and closing documents. This may be an added expense but it will be cheaper in the long run than finding out months or years later that the house was not legally sold.
So how do you actually go about selling the house? First set a price for your home. You must be willing to part with your emotions here or else you may never be able to sell your home. Research the market in your area and the pros and cons of your house before setting a price that is reasonable for your area.
Next, make yourself available. You can’t sell your house if you don’t have anytime to show it. If you don’t have time to market and sale the house, you are better off hiring an agent. If you do, showing the house is more than just opening the door to a prospective buyer. You must prepare your house for the showing by doing any necessary repairs, cleaning up your landscape, and cleaning the house up of any clutter. There is nothing worse than going into somebody’s house and seeing their junk everywhere. You want the prospective buyers to be able to picture their own furniture and belongings inside the house.
As far as getting anybody to come in to look at the home, you must market it. While you won’t have as wide of a reach as a real estate agent, you can market your house by listing it on sites like Craigslist as well as sticking a sign in the front yard.
In terms of the legal ramifications of a For Sale by Owner, Stephen K. Hachey, a Florida real estate attorney, can help you navigate this process. Contact him at 813-549-0096.
Closing on your home can be a very exciting time, but for many, it can turn into a disaster. What you see isn’t always what you get. So how does this happen?
The answer is slightly complicated.
When you buy a home, you rely on the real estate agent, home seller and the inspector to be open and honest with you. You expect them to disclose all the pros and cons of the property and you rely on their word. The sad fact is however, not everyone is truthful.
In many cases, there are problems with the house that nobody tells you about and you don’t see until you get settled in. For one couple, this meant finding out that water leaked into the basement every time it rained. The home seller, however, had repainted the entire basement to hide the water damage so the problem went unnoticed until after the sale of the home.
In another case, an inspector may tell you that a problem in the house is a simple and cheap repair that ends up costing the buyer thousands of dollars. In these cases, you should ask that the repairs be done before you purchase the home.
And even more people run into troubles purchasing a home because the paperwork has not been filled out legally. Each state has different laws for selling a home. Different forms must be filled out and certain legal language must be used in each one. If the paperwork is not written up properly or signed correctly, you may find out months or years later that the closing was not legal and therefore not final.
And then there’s the issue we have all become aware of in the last few years–the burst of the housing bubble. Many people have bought property in a housing complex that has since gone bankrupt, leaving their home, or half built home, the only structure standing in a desolate area.
So before you purchase your home, make sure to not only check it out thoroughly, but get second opinions as well as do research behind the area and the people involved to make sure that when you close your home, you know what you are getting into.