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Posts Tagged ‘foreclosure’
Five Ways to Encourage Foreclosure
No one wants to buy a home, and then lose it to foreclosure. It happens, though, even if you do everything right when buying a home.
There are some things that buyers do, however, that just encourage a foreclosure. Here’s what not to do when buying if you want to keep your home.
- Attend a “no money down” seminar. Most banks won’t even discuss a no money down loan with you anymore, but there is almost always one bank looking to make a profit. In exchange for a 15% interest rate, with the entirety of the loan due within five years, you might be able to get a no money down mortgage. But what happens in five years when you’re still living in the home, and can’t make the balloon payment? You’re going to lose the home.
- Putting your entire savings into buying a home. A down payment and closing costs are expensive. So is hiring a moving truck and getting any extra items you needed for your new home. That’s not an excuse to go overboard and clear out your entire savings account. Don’t assume that you can just start making up the difference again in your next paycheck, or that you should be able to turn to your credit cards for emergencies. Homes are expensive, and you need to have the money set aside for emergencies or to cover a mortgage payment or two if your income is suddenly reduced.
- Don’t take the good advice offered to you buy your real estate agent, mortgage broker, and other professionals you will be working with when buying a home. Don’t assume that you know everything, just because you’ve read a couple books on real estate. These people are professionals, and they want you to move into a home that you like, and one that you can afford. They aren’t giving you advice just to close the sale and collect their fees.
- Choose the most expensive home. Just because you’ve been prequalified for a $300,000 home, does not mean that you can easily afford the payments for that home. Find out how much you can reasonably afford (plan on 33% of your take-home income), and keep to that amount. Overextending yourself will only get you into a home that you can’t actually afford.
- Significantly changing your financial picture before close. Yes, it would be nice to have a new car sitting in your new driveway, or to buy the furniture set you’ve been eyeing as a housewarming gift to yourself. Don’t do it. Your credit score is affected by your available amount of credit. If you use that credit to buy any extras, that can change what the bank can offer you for a loan. It also affects what credit you have available in the case of a financial emergency. Don’t lose the home of your dreams because you just had to have that new dinette set.
No one wants to lose their home. Unfortunately, sometimes things happen beyond your control. Some things, however, you can control. Avoiding these common buyer traps, though, and you’ll be in better shape to keep your finances in good shape, and to avoid foreclosure.
Mortgage Delinquencies Hit Record High
Mortgage delinquencies hit a record high in June with more than 13 percent of homeowners late with at least one mortgage payment or in foreclosure, according to a report released Thursday by the Mortgage Bankers Association.
“As a sign that mortgage performance is once again being driven by unemployment, prime fixed-rate loans now account for one in three foreclosure starts. A year ago, they accounted for one in five,” says Jay Brinkmann, the association’s chief economist.
Florida is at the top of the heap with a total of 22.8 percent of all mortgages delinquent by at least one payment or in the process of foreclosure. That’s twice the national percentage if the Florida numbers are excluded. The next highest states are Nevada, 21.3 percent; Arizona, 16.3 percent; and Michigan, 15.8 percent.
“It is unlikely we will see meaningful reductions in the foreclosure and delinquency rates until the employment situation improves. In addition, in some areas where a number of borrowers have mortgages that are larger than the current value of their homes, any life events such a divorce or loss of a job are likely to translate into foreclosures until prices in those areas recover, not just flatten,” Brinkmann said.
Source: Mortgage Bankers Association (08/20/2009)