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Posts tagged mortgages

What To Do with Two Mortgages

Oct12
2009
Leave a Comment Written by Shanna

housemoney

In last week’s selling-tips post, we looked at the importance of avoiding two mortgages and recommended selling your existing home before buying another, while keeping your eye on the market throughout your sale.

But what should you do if you’ve already purchased a second home, obtaining a second mortgage along with it? What if you’re trying to sell but not finding the buyer?

Here are three options to consider:

1) Rent your old home. When people aren’t buying, they’re renting, so what potentially seems like a tragic home market could be the perfect time to become a landlord! If you can find renters whose monthly payments will cover your old home’s mortgage payments, you’ll take a huge strain off your finances.

2) Lower the price of your old home. The importance of pricing aggressively cannot be overstated, particularly in a competitive market such as today’s. If your home isn’t attracting interest, consider lowering the price.

3) Refinance. Talking to your mortgage provider(s) can be helpful in situations like these, where it may be in both their and your best interest to refinance. You may also want to check with Buy Owner to see what best rates we can connect you with!

Posted in Selling Tips, Tips and Ideas - Tagged contigency, selling a house, two mortgages
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REAL ESTATE TERM: EQUITY

Mar10
2008
Leave a Comment Written by Shanna

WHAT IS EQUITY?

Simply put, equity is the financial interest you have in your home. To determine your equity, you’d take the fair market value of your property and deduct what amount you still owe on any mortgages. The remaining figure is your equity.

WHAT IS A HOME EQUITY LINE OF CREDIT?

 Many homeowners cash in on their property investment with a home equity line of credit. What this essentially means is that the bank looks at your equity (fair market value minus what’s owed) and loans you money based on it. By using your home equity, you may be able to qualify for a large loan at a good rate.

WHAT IS FAIR MARKET VALUE?

Fair market value is the price that a property would hypothetically sell at, given current conditions, trends, and comparisons. It’s conditioned upon several factors, all of which an appraiser would take into account.

Posted in General Information, Tips and Ideas - Tagged equity, real estate term
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Delay in Foreclosure Process

Feb14
2008
5 Comments Written by Carrie

In 2007, the Mortgage Bankers Association noted that half of the 1.3 million home mortgage loans were in foreclosure at the end of the July-September quarter. With only one month under our belt this year, private economists already expect the number of foreclosures to double to an astonishing one million in 2008! A new plan announced by the Bush administration on Tuesday, February 12 hopes to alleviate this problem.

Put together by six of the nation’s leading financial institutions, “Project Lifeline” gives homeowners threatened with foreclosure a 30-day extension. These institutions include Bank of America Corp., Citigroup Inc. Countrywide Financial Corp., J.P. Morgan Chase and Co., Washington Mutual Inc. and Wells Fargo & Co. As members of the Hope Now Alliance, created by Bush in December, these lenders are responding to a huge mortgage crisis here in the United States.

Previous relief efforts have focused solely on high-cost subprime loans. For example, last year, Senator Hillary Rodham Clinton called for a moratorium on subprime 90-day foreclosures. However, this plan was biased against certain homeowners. The “Project Lifeline” initiative is designed to help everyone, no matter what type of mortgage is owned. Homeowners who are at least 90 days overdue on their monthly mortgage will be contacted and given the opportunity to put the foreclosure process on hold for 30 days. During this time, lenders will help said homeowners to a pay a more reasonable rate per month.

The obvious goal of the project is to give homeowners a way out, and to negotiate with lenders on more affordable mortgages. However, if a homeowner has already declared bankruptcy, has an impending foreclosure date or has a mortgage on an investment property or a vacation home, he or she will not be eligible for this program.

Though the program does not guarantee that every struggling homeowner will be helped by “Project Lifeline,” many supporters believe it is a step in the right direction.

Posted in Market News - Tagged foreclosures, news
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“Oops:” How Mortgage Lending became a Crisis

Dec10
2007
Leave a Comment Written by Sarah

housemoneyChances are, you have heard the phrase “mortgage crisis” more than a handful of times in the past few months.

If you are dipping your toes in the first-time mortgage pool, it is important to assess your own finances before relying on lending companies to guide you.

As this crisis has shown, you have to take responsibility for your own actions, as a homeowner and an investor, so that others will not take advantage of your foray into home ownership.

How it Happened

Like any good, old-fashioned financial crisis, the mortgage lending crunch began with speculation and risk–in this case, lenders issued high-interest loans to high-risk borrowers, or people who would normally be unable to afford to own a home. In the past, high-risk borrowers were far less likely to receive a loan than the financially stable. The high interest rates associated with this high-risk lending motivated some lenders to seek out high-risk borrowers, with the expectation of a high-interest return. While the housing market was strong, lenders saw no reason why they could lose money on what they thought was a foolproof asset. This risk-based pricing is common with major investments, but only gets complicated when the “risk” is not only based on the economy, but on the responsibility of the individual homeowner.

Enter: Middleman

Between 1997 and 2006, American home prices increased by 124%, and many people purchased homes they could not afford. Interest rates rose steadily with real estate prices, and new homeowners could not afford their monthly payments when their once-low interest rates rose astronomically. Once the real estate bubble burst, some homeowners were left with a depreciating investment and an increasing monthly payment. Foreclosures ensued.

Bank lenders then used their mortgage-based equity to attract bigger investors interested in mortgage-backed securities. The risk was passed onto these investors, who, essentially, had invested in an investment of an investment. These investors could fire-sale of homes for well below market value if they ever needed to recoup money lost on failed mortgage payments. While the investors lost money, homeowners lost both the financial and personal investments tied to their home mortgage. Since this risk has been passed onto bigger investors, a chain of careless lending left the homeowner homeless, and the lender with a pile of foreclosed properties.

Cleaning Up the Mess

Counselors are dealing with victims of foreclosure in order to educate them about risky, misleading, and predatory lending. Some banks are reevaluating their current mortgages, switching many adjustable-rate mortgages to a manageable fixed-rate mortgage. While many homeowners bought into a home that they couldn’t afford, there are countless others who are getting a second chance for financial stability. While risk-based lending is common on a market scale, it is much harder to judge who can and cannot pay a mortgage. The error was unmistakably human, and it is the people—not the investment companies—who have paid the price. Oops.

Know How it Works

As a rule of thumb, you can usually afford a home that costs two-and-a-half times your yearly salary. This does not account for maintenance or property tax associated with the home, nor does it factor in any of your own recurring debt.

Taking these factors into account, you need to find out how much banks are willing to lend to you. For this, you should seek prequalification for a loan from a few different lenders. Your best bet is working with Buy Owner’s mortgage partner, Guaranteed Rate, which will work hard to get you the best rate possible.

Prequalification is not an official loan approval, but it will give you a better idea of what the lender will grant you, and what the best interest rate you can get is. The preapproval, then, will tell you exactly how much you can mortgage, based on an assessment of your credit and finances. It is important to remember that the maximum that the lender will offer you is not necessarily the maximum that you can afford. While the lender may calculate that you can afford $3,000 a month, that may not include the cost of your lifestyle, other needs or special debt. The most important factor in finding a mortgage is to take responsibility for what you can afford, and not just the maximum of what a lender will provide.

Posted in General Information, Market News - Tagged buying a house, guaranteed rate, mortgage crisis
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Founded in 1984, BuyOwner.com® is the leading provider of real estate marketing services. We pioneered the "For Sale by Owner" (FSBO) market, which today represents over 20 percent of all residential real estate transactions.

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