The popularity of the first time home buyer’s tax credit of $8000 and the added incentive for current home owners to buy of $6,500 may have been too much to handle in time for closing by June 30th, 2010. While providing a form of discount loans on the housing market, that will only be true if the home buyers can meet the deadline to receive the credit come tax time. Many homeowners who rushed to take advantage of the program did manage to get their contracts signed by the April 30th, 2010 deadline, but are failing to close by June 30th. Realtors are begging Congress to consider extending the closing date to September 30th, 2010.

(more…)

The mortgage crisis has affected many people and their ability to pay their mortgages over time as the economy has been rapidly declining. Many were tricked into believing they could afford homes or were naive enough to think that they could easily sell their homes when they could no longer afford their payments. Inflated prices and adjustable mortgages led to many foreclosures and many had to sell their homes at a loss after job losses and defaults on payday loans or credit cards. Those who were foreclosed on had previously lost their jobs due to a shrinking economy, but many will eventually be able to move into a rental and slowly build their savings up to buy a new, more affordable home as home prices go down. Others aren’t so lucky and ended up homeless or living with relatives, unemployable or just not willing to take a step down pay-wise to get by. There are a million stories of hardship and misery due to the mortgage crisis, but there are also stories of home loss that really have little to do with the mortgage crisis, but with other unrelated hardships.

(more…)

There’s been a lot of talk of “strategic defaults” on home loans. These are loans where the buyer may have the money to continue paying the mortgage, but their home’s value has plummeted so much that they’ll never recoup their losses. Average house prices in 2009 decreased, and in some foreclosure prone areas a home may have lost from 30 to 50% in value. Thus, homeowners faced with that bad news opt to walk out of the mortgage, default on the loan, and start over – making the bank take the financial hit for the loss is home values. Is this really smart? Before you consider taking such drastic measures, there are some things you may want to consider first.

What Will It Do To Your Credit?

In a society that increasingly relies on a good credit score to determine your trustworthiness, a strategic default may still leave a blight on your credit record. You may have difficulty obtaining loans for cars, a new home, and even getting a job as some employers now check your credit scores. Unless you’re independently wealthy, a strategic default is going to have a dire impact on your ability to get future financing on many things.

Will You Owe Taxes?

Maybe the lender will stop coming after you for a monthly payment, but the IRS may start to hound you for the difference in what you owe and what the bank paid at auction for your home. If you borrowed $250,000 and the house was valued at $200,000 and sold at auction, even if it was to the bank that issued the mortgage, you may have a deficit of $50,000 that can be viewed as income by the IRS in some states.

Watch Out for Deficiency Judgments

In addition, the banks or other collectors may try to seek deficiency judgments in court, causing you to not only undergo a foreclosure, and later a bankruptcy, to keep from losing everything. Even if you agree to let the bank keep the home, you must get it in writing that the account is settled in full. Otherwise, if the deficiency amount is sold to collectors you will continue to be hounded until that amount is either paid up or written off in bankruptcy.

Seek Legal Counsel

Even a decision that seems right can have vast implications going forward. If you’re considering foreclosure, always seek legal advice first to keep from being surprised later on. Make sure you understand the tax and debt ramifications of such a move, before opting to just simply walk out on your mortgage. It could be that it’s a better idea to hold onto the property five to ten more years and then sell it, once the market improves in your area, versus waiting seven years for a blot on your credit score to clear. Once you understand all the impact this decision will have on your future financial security, you will be more confident that the decision you make is the best for you and your family, and not just an easy out of a tough, and somewhat temporary, situation.

Bank of America (BOA) has been criticized and sued for its handling of homeowners with loans that are underwater. Homeowners in Washington, for instance, pointed out that while administering the Making Home Affordable Program (HAMP) loan plan to modify homeowner mortgages, it approved fewer than 13,000 applications of the total 1 million mortgages it actually services. The HAMP program has been plagued with much inefficiency, not specific to Bank of America, and some feel that Congress should step in to regulate the proper handling of these loans. Perhaps because of the lawsuit and the threat of courts intervening, BOA has stepped forward to offer a different plan.

(more…)

Gone are the days of rising house prices that beat inflation. A house used to be a sound investment, but these days many homeowners are finding them to be a liability due to falling home prices. Housing prices predictions isn’t too hopeful either. Until the glut of foreclosures is cleared away, the value of a home needs to be re-evaluated to help it become a true investment again.

(more…)

The average house price in 2009 has depreciated in most areas around the country, which is good news for buyers. Add to that incentives like the 8,000 home buyers credit for new home buyers and even existing homeowners, and everyone has something to cheer about in the housing market. With low mortgage interest rates available, if you’ve been sitting on the sidelines waiting for the market to bottom, now’s the time to jump right back in, but first you have to qualify. (more…)

Average house price in 2009 increased a small amount, but over all they’ve dropped 15 to 30% across the nation since the recession started. If you’re a homeowner watching your equity decline, it may be frustrating to figure out how to make this investment pay you back. There are ways to squeeze more money from this investment, until the market changes and you can sell with a gain outright. Here are a few strategies to consider if you’re holding on to an asset that feels like an anchor more than a life jacket. (more…)

Those that are interested in buying or selling their homes have been watching various sites with great interest to see what their 2009 house market prediction will be. So far, many people are refusing to make any sort of prediction, but those that have are saying that the price on homes will continue to decrease as the year goes on. This is a bleak outcome for those looking to sell, but may be exciting news for those that are wishing to buy at some point during the year. If you’re one of those people, don’t wait too terribly long before beginning your hunt for a new home. (more…)

If your mortgage interest rate has been reduced recently, you might be enjoying paying less each month. But what are you doing with the extra money? Since most of us were surviving before while making a higher mortgage repayment each month, we could continue to survive on the same income - and we should find a good way to invest the extra money we’re saving.

One obvious thing is to continue paying the mortgage back at the same repayment level - or depending on your loan set-up, paying the extra amount into an off-set or savings account to use to make a lump sum payment on the mortgage at some stage. This will help you save interest and years off your loan.

Alternatively, if you have credit card or other personal debts, use the extra money you are saving to pay off these debts more quickly. If you are in a better position and are debt free, then the money you are saving by having lower repayments on your mortgage could also be directed into your retirement savings accounts. It’s up to you to decide where the money is most needed, but the most sensible thing is to choose one of these options rather than just spending it as an unexpected windfall.

The small decisions on how exactly you set up your mortgage seem to be changing, according to a CNN Money report. Should you pay up-front points to reduce your rate? Should you make more than the minimum down payment? And should you lock in your mortgage interest rate?

These questions used to have fairly standard answers, but these days things look a little different. This is what some of the experts are now saying:

• Up-front points: Now, it’s often worthwhile to do this with lower interest rates in the offing. In particular, if you are fairly sure you will keep this loan for some years - which is more common at times like this, because refinancing is less likely - then do the math and paying a point up-front will often pay for itself within a couple of years and then the money you save is all a bonus.
• Minimum down payments: Some home buyers have been burnt by making large down payments and then seeing their home equity (and their cash down payment) shrivel up. That means if you’re buying in a market that is still in decline (or could be), don’t make more than the minimum down payment to start with.
• Locking the mortgage rate: Surprisingly, many say that locking in now, even though rates are falling, is actually quite smart. Rates go up much more quickly than they go down and you’re likely to get caught out over the life of your loan.