15 Jul 08 
Can I Get A Mortgage? Should I Get A Mortgage?
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Housing crash, mortgage crisis, credit crunch… it’s hard to read a newspaper these days without a flock of fearsome ‘c words’ jumping out to remind us of the problems plaguing us on a nationwide / global level.
One thing you won’t find, however, is the one thing the papers can’t report on. However smart the writers, they won’t know anything about the single most important factor in any financial decision you make – your own situation.
Markets might be struggling or booming; house prices might be rocketing or plummeting, but what really counts is what’s going on in your own life. After all, problems in the housing market might cost you 15% of your home’s value, but that won’t affect your finances anywhere near as much as losing your job, having a baby, or inheriting $50,000.
So, if you’re one of the many tenants teetering on the verge of buying a home, the most important question may be “Can I get a mortgage?”, but “Should I get a mortgage?” comes a close second – and both answers depend largely on your own situation. The macro-economics do matter, but not as much as your own ‘micro-economics’.
Let’s split your finances into the two simplest groups: income and expenditure.
Income
· How’s the job security – low, medium or excellent? Are you expecting your salary to go up, down or nowhere?
· Do you receive any state handouts? If you do, how reliable (and how significant) is this money? If you don’t, could you? Is anything about to change that could affect this one way or the other?
· Is there any money ‘in the pipeline’? Inheritances, insurance pay-outs, legal settlements, sale of assets…?
Expenditure
· How much do you spend? If you really cut it back, how long would it take to get that deposit together? If you already have a deposit, would a larger deposit help you get a better mortgage deal?
· Do you have debts? Could you pay them off any faster? Are you paying (e.g.) child support or alimony? How much longer will you be paying?
· Are you planning any major – and expensive – changes to your lifestyle? Getting married, for example, or starting a family? Some things can’t be delayed, but others can. Would it make sense to wait until you’ve bought the house?
They’re just examples, but these are the kind of factors that can really help you make your mind up. They’re not just more relevant to you as an individual – they’re probably more predictable than the macro-economic stuff you’ll find on the news. OK, you can’t know where you’ll stand 12 months from now, but your own future finances are probably a lot clearer than the world’s, the USA’s, or even your own state’s.
Finally, a look at the alternative
In closing, let’s take a quick look at a major factor that so often gets overlooked: the alternative.
Everyone worries about the possibility of losing money as house prices go down, and waiting years for that value to reappear. But unless you’re living with relatives, your rent is probably costing you thousands of dollars that you know you’ll never see again.
It’s true that waiting a year before you buy might bring the purchase price down by $15,000 – but if you’re spending $15,000 on rent, what’s the point?
Tags: affordable mortgage payments, credit crunch, house prices, housing crash, macro economics, micro economics, mortgage, mortgage crisis, mortgage deal, mortgage payments, struggling markets
23 Jun 08 Buy and Bail: A Solution to an Upside Down Mortgage?
“I am more than $200,000 upside down on my current home and the bank won’t entertain a loan modification and I want out of this situation!”
This statement is pretty common these days.
It’s hard to see your same exact home now on the market for HALF of the price you paid for your home. It sure would be nice to have half the mortgage payment you have now for the same house!
The Wall Street Journal wrote this article that basically brought a hush, hush secret into the light. Every loan person knows how to do it! Banks turn their head and ignore the issue! Realtors practically endorse it! Now they want to change it?
If you are upside down on your mortgage and your mortgage was giving you some “issues” then there is a pretty good chance the thought to “Buy and Bail” has crossed your mind.
Buy- Keeping your current home and buying a new one
Bail- Once you close escrow on your new home you let your current home go into foreclosure.
Although the article states there are some changes being made to the guideline for lenders, I have been in and around the business on a daily basis I haven’t seen any changes as of yet!
“So what does it all mean? How can I get it to work for me?”
(Let me state something for the record, I am actually against the “Bail” part of this as I believe you need to find out every option you have before you pack up and leave)
· Understand what it takes to buy: The general rule of thumb is that you will need to buy a bigger home (in square footage) or be relocating to another part of the city or out of state in order to fall inside the guidelines. If you want a home that is equal to or smaller and you are NOT relocating then chances are you will have some trouble buying a new home.
· Bail: Accomplish this with limited impact to your credit: I know the popular choice is to go ahead and start missing payments on your home but before you do this obviously you will need to buy first. Once that is done you will need to address your mortgage company properly. One of the best ways to bail will be with a short-refinance. This is similar to a short sale but you can arrange for a negotiation with the current lender by an attorney for an affordable fee! To make this scenario that much more appealing, it is possible to have this go through WITHOUT missing any payments! I know you want to get rid of the property, so read more about a short refinance here.
· Take advantage of this window of opportunity: The rule they plan on changing will make you financially responsible for both payments on your old house and your new one.
I will leave you with this, take advantage but do so in an ethical way. The banks/lenders may not seem to be helpful on the outside but you can get them to work with you if the information is presented to them properly. Seek professional advice because that will be the difference between success and failure!
Brent Lane
The Lane Group
http://www.thelanegroup.blogspot.com
Tags: brent lane, buy and bail, home loan, loan, mortgage, short refinance, the lane group, upside down mortgage, wall street journal
04 Jun 08 Who’s Got More Game, Plan
Now that we finally have the presidential candidate situation figured out, which in your opinion Senator McCain or Senator Obama has the more effective/beneficial plan for our current real estate market?
These are the current plans from each candidate for fixing the current mortgage crisis.
Senator Barack Obama is asking for a $10 billion foreclosure prevention fund that will help victims of mortgage fraud sell their home or modify their current mortgage. The Federal Housing Administration program encourages lenders to buy or refinance existing mortgages, and to convert them into stable 30-year fixed mortgages. The program would require the borrowers to share the equity of the home with the FHA when they sell or refinance.
Senator John McCain has proposed the “HOME Plan”. In this proposal, if a borrower sells his/her home for a gain, then the lender and the federal government each would receive a portion of the equity earned. McCain wants lenders to do for borrowers what the lenders are asking the government to do for them in terms of help. McCain has also asked for the creation of a Department of Justice task force to investigate mortgage crimes involving lending and securitizing home loans.
So in your opinion which candidate has the more beneficial plan? Which candidate do you think will most positively impact the current real estate market?
Tags: crisis, equity, help, housing, loans, McCain, mortgage, Obama, plan, Real Estate
