Archive for the ‘mortgage’ Category

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Mortgage Renegotiation Options

Wednesday, May 6th, 2009

Mortgage renegotiation options exist. But first do the homework to get ready for it.

Mortgage renegotiation can be an excellent option, depending on the situation.

In spite of the strains on the economy, job market, and other concerns like personal income security, mortgage renegotiation can be the right strategy to solve long-term of issues with meeting mortgage payments. But two important points accompany this advice: doing one’s basic homework upfront is key, as is identifying whether or not your ability to meet your mortgage payments is more of a short-term than long-term issue.

Mortgage renegotiation and short-term problems

If you foresee being able to make the necessary mortgage payments on the horizon of a few to several months from now, call your lender and ask about temporary forebearance or postponement of payment plans as an alternative to mortgage renegotiation.  While lenders may initially seem unwilling in the current real estate market to put a property through with this issue, there is little upside to lenders watching a property with which they have issued a mortgage go through the foreclosure process if it can be averted.

Mortgage renegotiation options for the rest

If your ability to cover mortgage payments is forseen to be a long-term problem, then mortgage renegotiation can be the best option. Take the following actions:

  • Calculate your DTI – debt-to-income ratio. How much of your pretax income goes towards housing costs? If your demonstrated DTU is above 38%, then lenders have deep incentives, including government programs now, to agree to a mortgage renegotiation and modification.
  • Write a letter of hardship to your lender, explaining your DTI and attach photocopies of supporting financial documents to support your argument for mortgage renegotiation. Struggle to sort through the documents? Set aside an hour to sift through them, organizing them into smaller and smaller piles until their manageable. Then review them systematically to identify the needed information in support of mortgage renegotiation. In the letter, emphasize your willingness to fulfill loan repayment and the desire to repay the mortgage.
  • Ask about the procedures in mortgage renegotiation to have the actual interest rate changed. This is more complicated because lenders will resist such a surgical change to a mortgage agreement without context, so a letter explaining your situation and desire to repay the loan will help as well.
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Posted in mortgage | View Comments

Blog Carnivals in Review

Friday, April 10th, 2009

Recent blog carnivals have covered a wide breadth of topics on debt and other personal finance topics. Some of the more interesting this week include:

Money Hacks Carnival

Solid Planning Tips and Tricks Carnival

Carnival of Twenty-Something Finances

Festival of Frugality

Carnival of Personal Development

Carnival of Wealth, Money, and Life

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Posted in Credit Card, Credit cards, Debt Management, DebtGoal, Goal, Lending Industy, Marriage, Paying Down Debt, Press, Saving, Spending, credit report, credit score, mortgage, stress | View Comments

Loan Modifications Not Helping

Friday, April 3rd, 2009

Many households with tight finances are staring at a fork in the road: should they modify their mortgage? Alan Zibel at the Associated Press has covered recently the issue in his article “Loan Modifications rise; many don’t lower payments.” He points to statistics that show home loan modifications in many cases are not lowering the monthly payments that homeowners pay. The data is surprising: a large percentage of loan modifications actually increase monthly payment obligations. In this economic climate, that can make the sudden loss of income hurt and if emergencies appear, they will cost someone significantly more if there are not enough emergency savings on hand.

So what should one look for in a home loan modification?

  • What is the difference between the percentage rate of the new loan compared to the old one, and is the modified loan at a variable or fixed rate? For that matter, was your old loan variable or fixed?
  • Beware of upfront fees or surcharges to even talk about getting your loan modified. Fees should only be collected if the the modification actually goes through. Along these lines, make sure to check the total package of fees charged to you in order to make sure that the modification is even worth the trouble.
  • Is the new monthly mortgage payment amount viable given your budget? If you still can’t swing a lower monthly payment according to your budget, the fundamental problem remains unsolved. Don’t have a budget? Set one up in minutes.
  • What percentage of your gross monthly income is going towards payments? The federal government’s plan allows homeowners to have their monthly mortgage payments reduced to 31% of their demonstrated gross monthly income if the outstanding principle balance on the mortgage is $729,750 or less. Though spending a higher percentage of your gross monthly income on a mortgage typically means you are paying off your mortgage debt faster, this is not necessarily the best strategy for someone that has income insecurity or other more pressing debt obligations to pay down like credit cards. Also, to qualify for the federal plan, the home in question needs to be the primary residence.
In essence, choosing a home loan modification needs to be done on an informed basis. Make sure to understand your budget, even if it is rough and basic. Write down a quick list of all of your outstanding debts. If paying down mortgage debt is not a top priority, focus on getting your monthly mortgage payment lowered in order to meet basic living expenses and pay off other debts.
 
Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.
 

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Posted in Paying Down Debt, mortgage | View Comments

The Rise of Mortgage Scams

Monday, March 23rd, 2009

One of the problems with our current era of foreclosure madness is the rise of mortgage scams. These are designed to sap funds out of vulnerable families who are looking for a viable option when faced with the gamut of housing issues: late payments, missed payments, foreclosure, short sale, or even seeing trouble on the horizon due to income or debt loads without having yet missed a payment.

Francine Knowles at the Chicago Sun-Times provides a fairly comprehensive list of ongoing mortgage scams that can masquerade as legitimate solutions to a financial bind. Watch out for these offers, among others:

“FTC says avoid anyone who:

•  •  Guarantees to stop the foreclosure process, no matter what your circumstances.

•  •  Instructs you not to contact your lender, lawyer or credit or housing counselor.

•  •  Collects a fee before providing you with any services.

•  •  Accepts payment only by cashier’s check or wire transfer.

•  •  Encourages you to lease your home so you can buy it back over time.

•  •  Tells you to make your mortgage payments directly to it rather than your lenders.

•  •  Tells you to to transfer your property deed or title to it.

•  •  Offers to buy your house for cash at a fixed price not set by the market at the time of sale.

•  •  Offers to file your paperwork for you.

•  •  Pressures you to sign paperwork you haven’t had a chance to read thoroughly or don’t understand.”

The problem with these scams is not merely that they may take some of your money and provide little in return. In reality, they may derail your attempts to eliminate debt by setting you back from funding the top priorities in your life; they may actually do damage to your financial health; cause your credit score to drop; jeopardize your financial and security; and take away your emergency savings. Instead, look to sensible mortgage advice that can help you to clearly evaluate your options and get you moving in the right direction; the silver lining in the cloud is that there is always an option for you to choose, no matter how troubled your mortgage situation is, that represents the best course of action to get you headed back towards financial health.

Raj Patel writes for DebtGoal.com, a do-it-yourself system for getting out of debt and lowering your interest costs.  DebtGoal.com incorporates all of the techniques discussed in this post and can help users understand and get visibility to and manage their debt finances.

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Posted in mortgage | View Comments

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