Steps of Foreclosure

• Home
• Steps of Foreclosure Resources

Foreclosure Loans

November 16th, 2008    Subscribe To Our Feed

If you are at risk of losing your home to foreclosure, you will probably receive all types of information in the mail from company’s offering  foreclosure loans to help save your house.  What you need to know is that more and more banks are reaching out to homeowners that are in jeopardy of losing their homes and offering to rework the terms of their mortgage loans.

The number of foreclosure loans that have flooded the market have affected home values across the country.  Lenders are becoming more willing to help homeowners keep their homes.  If you are experiencing problems with being able to pay your mortgage, your first step needs to be contacting your lender.  The proposed government bailout for home owners that are at risk of losing their homes would require lenders to modify existing home loans with either a reduced interest rate or longer loan terms so the mortgage would be affordable for the homeowner.  Contacting and negotiating with your lender is an activity you can do yourself without paying someone else for this service.

The next step to take is cut your spending.  Do you really need to eat out at an expensive restaurant every week?  Do you need a luxury vehicle?  By cutting your expenses, your lender will realize that you are serious about saving your home and they in turn will be more willing to work with you on a loan modification.  Because of the enormous volume of homeowners are that facing foreclosure, banks want to help you stay in your home.

You can help yourself  by contacting your lender and working with them directly as opposed to working with a third party company offering help with foreclosure loans.  If you are uncomfortable with working directly with your lender, there are a number of non-profit organizations that can help with foreclosure loans at no cost to you.

FHA Loan Requirements

October 23rd, 2008    Subscribe To Our Feed

A FHA (Federal Housing Administration) loan is an excellent option to purchasing a home with a low down payment.  The credit requirements for a FHA loan vary from state to state, so you will need to check to make sure you understand the FHA loan requirements for your state.

FHA loan requirements include the following:

• Any person applying for a loan must have good credit for at least 2 consecutive years following a bankruptcy and the bankruptcy must be at least 2 years old.
• Any foreclosure history must be at least 3 years old and a good credit history for at least 3 consecutive years.
• You will need to prove that you have had a stable income for at least 3 years and that you have paid all your bills during that time period.
• You must be able to make a 3% down payment, which is considerably lower than conventional loans.
• There is a 2.25% closing cost and monthly payments on your FHA loan must be roughly 30% of your income.

One FHA loan requirement that is nice is that you can assume an existing FHA loan from a seller, if you meet all the qualifications, or you can pass the loan to a buyer.

There are also FHA loan requirements that the property must meet before it can be considered eligible for the loan.  Eligible properties include:

• Single-family home
• 2-4 unit properties
• Condominiums
• Double-wide manufactured home
• Modular home

Homes that are ineligible or that do not meet FHA loan requirements include:

• Co-ops
• Boarding houses
• Commercial property
• Hotels
• Private Clubs
• Seller has owned the house for less than 90 days

In order to meet FHA loan requirements , the property must be used as a primary place of residence.

Stop Home Foreclosures

September 17th, 2008    Subscribe To Our Feed

To stop home foreclosures the homeowner must act immediately if there is a problem.  The most common cause of a home foreclosure is that the homeowner waits too long to get in touch with the lender or they don’t respond to the lender at all once they start receiving late notices.

One method to stop home foreclosures is to contact the lender and make arrangements to renegotiate the original mortgage.  You could ask the lender to reduce the interest rate or extend the length of the loan in an effort to reduce the monthly payments.  These types of arrangements to stop home foreclosures are typically temporary.  If you feel uncomfortable negotiating with the lender, contact a professional foreclosure negotiator for help.

Another method to stop home foreclosures is to renegotiate the balance of the current loan plus any arrearages and legal fees.  Ask the lender if they would be willing to take less than this amount.  If the lender agrees, you could refinance the new loan amount.  For example, if the balance of your current loan is $110,000 and you have arrearages and legal fees totally $20,000.  You are liable for a total of $130,000.  Negotiate with the lender to accept $90,000 as the total payoff.  If the lender agrees, you can refinance the $90,000 which should lower your monthly payments and eliminate $40,000 of debt for you.

In most cases bankruptcy should be your last option to stop home foreclosures.  Filing for bankruptcy will allow you to keep your home.  You can file for bankruptcy on your own but it is highly recommended that you hire a qualified, experienced bankruptcy attorney.  The court will look at all your finances and decide if you own anything of value that can be sold to repay any portion of the debt and will usually establish a reorganization plan.  Under a reorganization plan, you will be required to keep up on all payments or you will lose the courts protection and your home will go to foreclosure.

Even if you decide to give the house back to the lender to stop home foreclosures, you need to be aware that if you owe more than the house is worth, the lender could file a deficiency judgment against you.  A deficiency judgment is the difference between what the lender will receive when they sell the home and what the balance of your loan is.  For example, if you can’t stop home foreclosures and the lender takes your home and sells it for $95,000 and your loan balance is $110,000, the lender could sue you for the $15,000 difference plus any legal fees.  Before you give your home back to the lender, negotiate with them to forgive any potential deficiencies.

Short Sale Foreclosure

September 8th, 2008    Subscribe To Our Feed

A short sale foreclosure, in real estate terms, is the sale of a house where the sale price is less that what the current homeowner owes on the mortgage.  Lenders will sometimes agree to a short sale and take a small loss on the loan instead of going through the lengthy foreclosure process.  If the lender does agree to a short sale foreclosure, it most cases they will sale the house for less than it is worth and forgive the rest of the loan that is owed.

A short sale foreclosure can be a great opportunity for everyone involved.  The seller gets out from under a mortgage liability that they can no longer afford without facing bankruptcy.  The buyer gets a house at a reduced price.  The lender can minimize their loss without going through the long foreclosure process and possibly be stuck with an unsalable property.

Lenders will benefit from a short sale foreclosure because they won’t have to go through the lengthy and costly process of a foreclosure, then put the house on the market, going through the entire marketing process in order to sell the house and possibly having the house set unoccupied for a number of months.  There was a study performed by the congressional Joint Economic Committee in the first part of 2008, that stated foreclosures could cost the lenders as much as $50,000 per foreclosure.

Buyers should work with real estate agents who are familiar with the short sale foreclosure process.  The process itself can be a lengthy, frustrating one.  Experienced agents can help with the negotiating process and also inform the buyer what type of paperwork they are going to need in order to convince the lender that a short sale foreclosure is the best option for that piece of property.

If you are considering a short sale foreclosure, make sure that you get everything in writing.  If the lender agrees to take a short sale get it in writing that you will be absolved of all debts associated with the mortgage.  Also, work with the lender to make sure the short sale foreclosure shows the debt was satisfied and not shown as settled for less than the full balance because this could affect your credit rating.  You will want to check and see if there are any types of tax ramifications associated with your short sale foreclosure.  If possible contact a tax attorney prior to finalizing your short sale foreclosure.

Fannie Mae Foreclosure

July 17th, 2008    Subscribe To Our Feed

Fannie Mae’s job is to ensure that mortgage bankers and other lenders have enough resources or funds to lend to home buyers at low rates.  Fannie Mae was established by the government in 1938.  Fannie Mae became a shareholder owned company in 1968, funded with private capital raised from investors around the world and on Wall Street.  Fannie Mae does not make mortgage loans directly to home buyers but buys mortgages that have been created by lenders.  This provides a constant source of mortgage funding and liquidity in the mortgage market.

As a home owner or an investor you have many options for affordable homes.  One of those options is a Fannie Mae Foreclosure.  Although Fannie Mae works hard with their partners to help homeowners keep their homes and avoid foreclosure there are still times when a home is going to become a foreclosed property.

A Fannie Mae foreclosure can include single family homes, condominiums and town houses.  They can be new homes or older homes located in a variety of neighborhoods throughout a community.  Some Fannie Mae foreclosures will require repairs so before you purchase one of these properties get a professional home inspection.  Then you will know what needs to be repaired and also how much the repairs are going to cost.  If the property is in very poor condition you might not be able to get a mortgage loan for the purchase.

Fannie Mae foreclosures are sold through local real estate agencies.  A real estate agent that is a member of the local Multiple Listing System (MLS) will be able to help you find available properties in your area.  Once you find a property that you are interested in purchasing, the listing broker will present your offer to Fannie Mae for their consideration.  Fannie Mae will accept the offer, reject the offer or make a counter offer.  Once an agreeable offer is presented and accepted by both parties, you will become the home owner.

Profit From Foreclosures

July 3rd, 2008    Subscribe To Our Feed

Only experienced investors should invest in foreclosures.  You will need a lot of cash (in case you need to hold onto the property for several years) in order to make a profit from foreclosures. Home prices will probably continue to fall during the coming year and if you decide to list the home for sale, it will probably be on the market for a while.

Unless the foreclosed property that you wish to purchase is bank owned, any outstanding liens and fees that might be associated with the property will be transferred to the new owner. If the property is bank owned, most of the liens and fees should be removed from the property. If you are planning on buying the property and then reselling, you need to take into account holding costs, transaction costs, marketing costs and a depreciating market when calculating your profit from foreclosures. Neighborhoods that have a lot of foreclosures are the most likely to suffer from further depreciation. Of course, these are the neighborhoods that most inexperienced investors will be tempted to buy homes in because they will offer the steepest discounts. One of the reasons that homeowners owe more on their homes than they’re worth is because the appraised value did not reflect the true market value of the home. Many homes were appraised at a higher dollar amount so the home could qualify for the full amount of the asking price.

The good news for making a profit from foreclosures is that if you have a good credit score and are buying bank owned properties, many banks today will offer you below-market interest rate loans. These types of loans typically don’t cost you anything in fees and it also allows you to spend more for a home. However if you are buying a bank owned property you will want to negotiate the lowest price for the property that you can.

Next Page »

Copyright © 2008 Steps of Foreclosure

Credits: Work From Home | Matteo Turchetto | Andreas Viklund