Act now to forgo foreclosure

The subprime mortgage crisis has been on the tip of everyone's tongue lately, and the housing market has cooled. Rather than being discouraged by this, smart investors realize that this is the time for deals to be had. We're in a buyer's market, which is an enormous relief for buyers who have watched the market balloon over the last decade. But what if you are one of the thousands of people who got caught up in the low-interest madness, thinking you'd be making enough money to cover the difference when your rates reset? If you are facing difficulties with your loan, remember that the ultimate goal is to maintain your credit rating. You may be able to negotiate with your lender, you may be able to refinance or you may be forced to sell your home now in order to buy one in the future, but the sooner you address the issue the more options you will have. By getting your finances in order you will be able to get on with your life sooner. Don't add to your stress by ignoring your fiscal situation; follow these steps to getting back on track: Know the details – go over all your loan documents so that you are prepared for any upcoming resets or changes. When will your payments increase? By how much? Can you refinance? What kind of penalty would you face, if any? Cut in other areas – can you take a roommate or a second job to help make your payments? You may need to look at significant changes in your spending and lifestyle. Do not make any major purchases at this time, and look at liquidating other assets, such as cars or boats, to help meet your payments. Contact your lender – You should take the initiative with your lender. Contact them before the problem becomes overwhelming. If you receive calls or letters from your lender respond to them as soon as possible. Do not wait to get too far behind – lenders are less likely to move quickly into foreclosure if you are proactive. You want to speak to the right people – ask for the loss mitigation or collections department. Be honest with them about your situation and don't make promises you can't keep. Beware of foreclosure "rescue" rackets – There are a number of scam artists targeting people in neighborhoods where foreclosure rates have been high. They approach troubled homeowners with promises to help them keep their houses. These "rescues" often come with payments that are out of reach of the average homeowner and result in homeowners being defrauded of their homes, sometimes still owing the original mortgage amount. Any company that approaches you with such an offer should be checked out through the Better Business Bureau, your state real estate commission and Attorney General. Do not sign anything without reading it all, get all promises in writing and ask your attorney or a financial professional to review any paperwork before you sign it. Call a nonprofit group offering free housing advice for more information and counseling. They may be able to help you with your options. If you took out a loan between Jan. 1 2005 and July 30, 2007, are current on your loan payments and your mortgage has not yet reset to a higher rate, you may be eligible for a five year rate freeze. If all else fails, negotiate a short sale - if you have missed more than two payments but your home has not yet gone into foreclosure you may be able to sell it for a price that falls short of what you owe the lender. If your mortgage holder agrees to accept the price and forgive the rest of your debt, they forgo the pricey foreclosure process and you walk away with minimal damage to your credit score. You can chalk it up to experience, save up a down payment and buy low.

Buying a home after bankruptcy beware of shady subprime mortgage lenders

If you have a recent bankruptcy and are looking to buy a home, be careful of unethical or predatory lenders. Whether you are looking online or offline for a mortgage lender, it is becoming increasingly more common that subprime lenders are taking advantage of bad credit borrowers. Many lenders will take advantage of borrowers with recent bankruptcies and bad credit because they know that the borrowers loan options are limited. Sometimes these lenders will charge excessively high fees, extensive pre-payment penalties on the home or ask for a fee upfront to "process" the loan. Here are some tips on applying for a mortgage loan after a bankruptcy: Beware of the Lender Asking For a Fee Upfront - Anytime you are applying for a mortgage loan, the only fee you should ever have to pay is the application fee which covers the cost of the lender pulling your credit application. Some lending scams involve asking for a processing fee of hundreds to thousands to process the loan. Compare Loan Offers - If you can compare from 3-4 mortgage application quotes then you will know what to expect the current interest rate for subprime mortgage loans to be. If you accept the first mortgage loan offer you have, you may be paying a much higher interest rate than what is reasonable for your credit history. Get Closing Costs in Writing - Brokers know that if a borrower has bad credit, they are most likely going to be more concerned about getting a reasonable interest rate and just getting approved than making sure they get normal closing costs. This is where many lenders will ding the borrower with credit problems. They will sometimes charge excessive closing cost fees. Get the list of closing costs in writing ahead of time and then do research online to make sure that the costs are reasonable. If the costs are not, go back to the lender and tell them that the closing costs are too high and you will not go through with the loan until they are lowered to be what is normal. The broker will usually comply, because they don't want the loan to fall through.