You want to buy a house or you are facing rising monthly rates – what to do?

The Housing Market and Mortgages

You turn on the TV or look in the newspaper and it doesn’t take long before the housing market and lending woes are taking front stage

While the news isn’t the best in the world, there are still some options for those looking to buy a home or faced with rising home payments. Yes, a home loan may be tougher to get but you can still get one.

One thing you can do is be proactive and understand all of your options. Take time to research. I know it is really easy to jump at the first offer you can get, especially when you are trying to get out of an apartment or rental property, but TAKE YOUR TIME.

If you are faced with the possibility of losing your home because of rising payments, contact your lender as soon as possible to try and work out a reasonable solution. Contrary to what some may think, Banks and other money lenders don’t want to be in the real estate business. They really just want to make money off the money they have leant out. If they have to foreclose on a home, then they have to do something to get rid of it. In this case [b]DON’T WAIT[\/b]When you see you are going to have a problem contact them immediately. It shows them you want to work with them to pay them their money back.

If you don’t understand what has happened and why, well here is just a real quick overview. From about 2000 to 2005 interest rates were low and, because houses were selling the prices were going up. There was a big demand for mortgages. With a low interest rate you could afford a large more expensive house than you could in 1999. Unfortunately people were wanting to buy houses which they really couldn’t afford, enter the Adjustable Rate Mortgages. With an Adjustable Rate Mortgage, the first 2 – 3 years were helping people get into houses with low monthly payments. Here is the rub, after that time period, the rate was tied to an Index which then began rising drastically, so some one who could afford the lower monthly rate at first was suddenly hit with rates which they couldn’t afford. The problem was the people didn’t understand what could really happen down the road AND the lenders didn’t help any because they didn’t fully explain. Then, I am sure there were some that thought, “Oh yeah, in 2 – 3 years, I will have a bigger income so I can afford the increased payment”. So what happens if the big raise doesn’t come? GULP!

So what do you do if you want to buy a new home? Here are a few tips:

1) Do everything you can to raise your credit score in the months before you apply. Pay down on your credit cards and make all of your payments on time
2) Strangely, closing credit card accounts before you apply can actually affect your credit score negatively and DON’T open any new ones
3) Review you credit reports for erroneous information. You can get one from each of the credit reporting agencies FREE once a year. You can go to http://www.Annual CreditReport.com
4) If possible make a larger down payment if you can afford it.
5) Be realistic, does it make financial sense to buy at this time or should you consider something a little less expensive.
6) Remember, House Insurance and Taxes have to be factored into your monthly payment, regardless if you let the mortgage company pay them from escrow or you do it yourself at tax time.
7) Negotiate the best deal by contacting several lenders, however, realize that the more inquiries there are for your credit report can negatively affect your credit score.

Ok so what do you do if you can’s make your payment

Like I said earlier, contact your lender IMMEDIATELY. See if you can’t work out something so you can make payments and keep your house out of foreclosure. The results of a foreclosure could be severely damaging your credit or still owing the lender money if the house doesn’t sell for what you owe.

Remember, in most cases the lender does not want to be in the real estate business, and would rather collect the money for you.

If you get a notice from your lender that your loan is going to be rest due to the ARM tems of your agreement, be sure and respond.

So if you get a call or letter from your lender or servicer regarding the upcoming reset of your loan, be sure to respond.
There are public and private organizations that can provide assistance and advice for no charge or a small fee. To find a reputable counselor in your area, contact the U.S. Department of Housing and Urban Development or the Homeownership Preservation Foundation. This is a good link for more information on home loans:

http://www.fdic.gov/consumers/consumer/news/cnfall07/help.html

As a last resort, you may have to consider selling your home. While this is hard, and I hope I never have to face that, it might be for the best. Rather than losing your house, whatever equity you have in it and doing considerable damage to your credit score, you might be better off taking whatever money you can get out of it and be in a good position to start over in a few years.

Good luck and may God bless. All is not lost.