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Foreclosure and its Effects on Your Financial Future

June 1, 2011 By Leave a Comment

Foreclosure is a big issue. You’re not only facing the loss of your home now. Whatever you do can affect your future ability to buy a house or even a car in future. By losing your home to foreclosure, you can affect your financial future in a very serious way. This in turn makes it difficult or even impossible to obtain new loans for yourself or your children, pay for school or even buy a car regardless of whether it is new or old. It may also end up with you paying higher taxes and higher insurance rates than what you did when you owned your home.

Foreclosure destroys your credit rating for up to a decade, even when you manage to stay focused enough to pay your other bills. It also takes some amount of time to regain your good name as well as the trust of creditors, before you can receive any new line of credit.
When you finally end up being able to get a new loan, it’ll most probably be a huge interest rate due to your foreclosure. It is quite usual to pay an interest rate on about 15% or more on the first loan which you receive after your foreclosure.

While it is true that you will eventually end up repairing your credit and you’ll be able to apply for another mortgage. You should be ready to place at least 20 % down on any new home and pay a higher interest rate for a shorter period of time. At this stage any lender who is willing to take a chance and give you a loan will try and reduce the perceived risk to them by all means possible.

The inability to borrow money for a certain period of time isn’t the only disadvantage of a bad credit rating. Most insurance companies use a consumer risk score when they determine your insurance premiums. This risk score is usually factored together with your credit score and a bad credit score is always equivalent to a high risk score.

If you want a better job, keeping a high credit score is all part of the works. A huge number of employers now make credit checks on prospective employees and they now require a minimum FICO score so that they can get the job. Foreclosure can send your credit rating way, way lower and closer to bottom than you’d ever imagined. This in turn could also keep you away from your dream job.

It isn’t only about your credit score; the fact that you lose your home could also lead to you paying more in terms of federal taxes. The reason why is that when a lender forecloses on a property they are permitted to deduct the interest lost from the life of the loan on their federal tax return. After this the IRS can easily come back to the homeowner and require them to claim the same lost interest as income on their personal tax return which then costs them thousands in additional tax.

You should also keep the fact in mind, that when you use your home, you no longer qualify for any homeowners deductions which may have previously helped to reduce your tax and keep it down.
Regardless of all these negatives, the adverse effects that financial foreclosure can have on your life are only further evident from the loss of equity which it claims. A lot of people consider their homes as a huge part of their future. Without their homes they have no safety net with which to use to handle their unexpected expenses and probably their retirement.

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Military Families and Foreclose Prevention

June 1, 2011 By Leave a Comment

Most people aren’t aware of the fact that the mortgage lender will be unable to foreclose on your home, if one of the people holding the mortgage is on active service in the military. That’s right! No matter how far behind you are on your mortgage payments, no lender is legally permitted to foreclose or make a seizure on the property of an active military service person until a period of 90 days after they have returned to civilian life. This position is guaranteed by national mandates which have been instituted by Congress.

In addition to this foreclosure moratorium, those who obtain a mortgage prior to enlistment or the call to active duty may also qualify for a reduction in their interest rates that can help to lower their mortgage payments while they are away.

People who are in the military often find it hard to make their mortgage payments as long as they are still receiving the government salary for active duty personnel. That’s what the Service member’s Civil Relief Act (SCRA) was designed to help. It allows active duty personnel the opportunity to have their monthly payments reduced by as much as 6%. Depending on the current interest rate level this may turn out to have a huge impact on their monthly payments. The sum of money which is saved from such a reduction does not need to be repaid.
In order to qualify for such a reduction, your lender should be notified as soon as you have gotten your orders.
You’ll need to have the following in order to apply:
-A Copy of your military orders
-Duty notice
-FHA case number
-Evidence that your mortgage debt was procured before your enlistment/active duty status
-Your activation date

Also along with the interest rate reduction, certain military homes may also be eligible for a reduction in their monthly payments and/ or a complete stay in payments for a certain period of time. Such conditions are not governed by law but are usually considered in cases where military personal face severe financial hardship while serving their country overseas.

The most essential thing is that you should inform your lender as soon as it becomes clear that you will not be able to make the regular monthly payments and inform them of the necessary reasons why. It may take some bargaining but in the end most will agree to reduce the payment terms when the military person in your family is on active duty. It makes sense; the law doesn’t allow the lender to foreclose until the military person returns home, so why can some form of payment be negotiated?

Either way, there is no need for anyone on active military service to bother about losing their home when they are away. The law is the law; it is illegal to repossess the home of active duty military personnel until a period of 30-60 days after they have resumed normal civilian life, regardless of how far back they are on their payments. It doesn’t give a lot of time to make the necessary arrangements on your return home but it is a safety net for those you leave behind.

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How to Avoid Foreclosure

June 1, 2011 By Leave a Comment

If you are one of many homeowners facing the foreclosure of their homes in the coming months, you can take advantage of these tips listed here:

Don’t Ignore The Problem.

When you are unable to make your mortgage payment, getting rid of those late notices by dumping them somewhere may seem like the easiest solution. However, the idea of ignoring your creditors will deprive you of the chances of negotiating and effective solution which may permit you to keep your home as well as your credit intact.

Don’t Ignore Your Lender’s Inquiries.

Foreclosure can be expensive and may cost a lender around $50,000 and even more. This is a great incentive for them to work with mortgage holders who are struggling to make payments and negotiate new loan terms. It is for this reason that they keep sending notices and asking you to call them. Don’t think of ignoring inquiries from your lender. Make sure that you respond quickly to any correspondence which you receive in order to show how willing you are to work things out with your lenders and retain your home.

Find Out What Your Rights Are.

You should start going through all the paperwork which came with the purchase of your home. Such paperwork will list out all your rights where delinquent payments and foreclosure are concerned. After this, you may call any non profit credit agency in your area or one which specializes in foreclosure, the purpose of this will be to find out about the foreclosure laws in your own particular state. A lot of people lose their home because they are unaware of the mortgage terms which they agreed to when their homes were purchases. Subsequently they do not know what their legal rights are once they have failed to make any payments on their home.

Look at Your Options.

Losing your home to foreclosure isn’t always a straightforward option. A number of different ways and means exist through which you can prevent foreclosure; however you must be willing to do some hard work. You should think about all your options carefully before making any substantial decisions.

Seek Help.

You already know that you are in trouble long before that foreclosure notice shows up in the mail. Get help right away! There are plenty of nonprofit agencies and organizations all over the country you can turn to for advice and guidance.

Create a Budget.

Without a clear understanding of your money issues (and expenses) that have caused you to fall behind on mortgage payments, the odds are whatever you try and do to save your home will be in vain as you find yourself in deeper trouble down the road. Now is the time to get control of your spending; evaluate what you can (and cannot) afford; and make the appropriate budget adjustments.

Use Your Assets.

Sometimes drastic times require drastic measures – including selling off any and all of your assets including second cars, boats, RV’s timeshares, and more. If you have assets to sell, by all means do it!

Stay in Your Home.

Certain people tend to think that foreclosure is unavoidable and so they move from their homes. You shouldn’t, you may have more options if you are still resident in your home than if you aren’t.

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Buying Foreclosed Properties

June 1, 2011 By Leave a Comment

The statistics for foreclosure show that one in every 111 homes will face foreclosure next year. This means that for those bargain hunters seeking to tap in or a deal or two, are in for a great time with foreclosure deals. Even people who don’t want to make real estate investments and who are simply looking for a home can make use of foreclosures to tap into a deal.

Different states have their own particular guidelines on foreclosure and a number of other different regulations. Anyone interested should make sure that they have thoroughly researched the rules in their particular states rather carefully before they decide on purchasing foreclosed property. In some states previous owners may be given as much as an 18 month redemption period which will allow them buy back their property which has been sold at an auction. While the person who buys the said property at the auction can recoup their money, it may be quite disconcerting having to leave a home which you have just started getting used to.

Luckily this practice isn’t that common and a huge number of homes which have been repossessed are usually sold off and transferred immediately to the highest bidder.

If you’re looking to buy foreclosed properties, three basic options are available for you to take advantage of:

Contacting lenders personally.

Due to the high increase in foreclosure rates nationwide, a large number of mortgage lenders have started the practice of using in-house staff to handle various sales and transactions so that they can get the best financial benefit. You should check out a few major lenders in your area and see whether they list the properties that they have for foreclosure on their own. If they do, get a list and start checking them out. You should keep the fact in mind that when foreclosed properties are bought directly from lenders; you tend to pay more than you would pay at an auction. However, depending on the amount owed on the mortgage you may be able to walk away with up to 50% in instant equity.

Using Foreclosure Realtor.

Many realtors are specializing in foreclosure properties these days. This enables them to work with lenders and put the property on the market as soon as repossession has occurred. Again, buyers pay a little more, but since this process works much like buying a regular home from a realtor, it takes some of the risk away of losing the home during bidding or buying a home sight unseen and un-inspected. Although still sold as-is, many realtors will walk potential buyers through the property and allow inspections before an offer is made.

Bidding at Auction.

The most regular way to purchase foreclosed property is by bidding at auctions. A lot of auctions tend to be rather fast paced and will not allow a pre-auction walk through of the property to be bid on. Such practices may be risky for buyers. However, the potential that you have to purchase property for a small fraction of its real value makes it a very welcome way to make real estate investments. Such auctions usually start bidding at the exact amount owed on the property. Some states may allow bidding below this amount however.

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