What works for my credit - Foreclosure or Short Sale?

In very simple words, foreclosure is nothing but a tragedy.

It can hack your credit ratings to pieces. A foreclosure can take off up to 250 – 300 points from your credit score. That will typically affect your score for three years. If you lose your home to a foreclosure, you will not be eligible for a Fannie Mae backed loan for five years! And, that’s not it. Any loans with a mortgage company in the future may also be affected.

So what is the way out?

A short sale shows you a way out of this mess and does not affect your credit history! In a short sale, you do not pay back all the money you took from the lender. He agrees to give you a discount on the initial amount. Even though you are not paying off the whole amount, it does not reflect badly on your credit rating. Technically, the payment is considered full and final settlement. You can make a fresh start in two years.

Basic differences at a glance

Still confused which is a better option? Let us look at the basic differences between foreclosure and short sale.
1. A short sale is less damaging t your credit report as it shows up only for two years. A foreclosure on your property can land a huge blow to your credit rating, one that may not be easy to recover from.
2. A foreclosure can seriously jeopardize your plans of buying a house in the future. Not only that. You may find yourself hard pressed for choices if you want to do something simple like renting an accommodation.
3. The chapter is hardly closed after a foreclosure. Most banks are notorious for hiring collection agencies that are adept at recovering money, by hook or by crook. That is not the case in a short sale.

The Winner is … Short Sales!

Undoubtedly, a short sale is a better financial decision than a foreclosure. Look at the benefits. It does not mess up your credit score so badly; it is not a challenge to security clearance or employment; and you are eligible for a Fanny Mae backed mortgage after only two years.

Where do we come in?

If you are contemplating a foreclosure or short sale, get in touch with us. We have made it our business to negotiate loan restructurings and we will be able to get you the best deal from your lender. We have a reputation of being able to stop foreclosures when others had given up hope. We are great at what we do and we are sure that we will be able to handle all your queries. Do not wait until the last moment. Pick up that phone and call us today.

Getting to know things better………….Real Estate Purchase and Sale agreement

So what is a real estate sale and purchase agreement and what does it got to do with you? Well if you are buying or selling a property this is one document you need to know about for sure.

What exactly is it?
To put it simply, it is a contract you need to sign whenever you are buying or selling a property. For individual home sales, where the exchange of property is between private citizens, this document is quite short running only to few pages. But when it comes to corporate czars this document can be very bulky running to many pages. So let us go through the document to find out what this document contains, so that you are ready when the moment comes for you to sign it

The first part—Identification of parties and property
The first part of the document basically deals with identification of parties involved in the transaction and the property that is changing hands. The beginning of any real estate property and sale agreement begins with the name of buyer and seller identified by their unique social security numbers. This is usually followed by a simple statement stating the intent of all involved parties to buy and sell the property. After this, the identification of property is done by its address and its legal description (apartment building, single resident etc) to describe the type of property that is being sold. Once that is done, a detailed list is made of all the personal movable items like furniture which are also being sold as a part of this transaction. In case of furnished property, this list should be comprehensive and it should not miss even the smallest item so that there are no legal hassles later on.

The second part –Financial term of agreement
The second part of the document puts down in details when and how the money will be transferred to the selling party. This part starts with providing the details of the initial deposit like exact figure and date associated with it and how much it is with regards to the total amount to be paid. After this the agreement states how much the remaining amount is and in which form it will be paid (for e.g. in cash, cheque).

Dates to note in the document
Generally, there is a section which deals with the dates associated with the property like what will be the date of official closing of the property or the date of formal transfer of titles.

Section on damage to property
There could have been some colossal damage done to the property by fire, floods or by some other calamity. This detail also forms a part of the document.

When you speak of real estate business immediately an image of large amounts of papers with their legal haggles comes into mind .In middle of all this complex paperwork, real estate property and sale agreement maybe one of the simplest document you will come across related to this industry.

Will a home loan modification affect my Credit Score?

If you want to stay in your own home and avoid foreclosure, then you should consider a home loan modification. Are you worried what impact will this home loan modification will have on your credit score, and is it a good idea or a bad one to resort to this new idea?

Well, most of the homeowners do share your fear or worry. No single answer can be given for your questions. The impact on your credit score will depend on the amount not paid by you and the revised terms of the mortgage loan modification.

Your credit score should not get affected by a home loan modification, because, in technical terms, no money is borrowed from the lender. If the liability or debt burden is relatively small, then naturally the interest payments towards that debt will be less. As part of home loan modification, most lenders prefer to revise the interest rate downwards, and there is every possibility that your credit score will not be affected, but improve, as the monthly payment will be less.

Ideal Scenario

Though not quite common, some lenders even consider writing off a part of the principal amount in a home loan modification. If your lender decides to write off $50,000 from your principal, the loan reflected in your credit report will accordingly get reduced, and as such your credit score might improve as payment towards liabilities will be lesser.

Role of the lender

The impact on your credit score also depends on the lender. The lenders need to report the details of a home loan modification to the credit bureau, and invariably the lenders state that the original amount owed is less than the amount sanctioned under a home loan modification. Since you settle for an amount different from the actual amount owed, your credit score might be affected negatively. In case you have given notice for foreclosure or in it already, then your credit score will further get affected. In any case, a home loan modification is a much better option in comparison with a short sale or a foreclosure, as the probability of maintaining a better credit score is more in a home loan modification.

Incidence of Tax

Earlier, a loan modification is deemed as taxable income, equivalent to the amount forgiven, by the IRS authorities. If, by way of loan modification, your total debt burden is reduced by $50,000, IRS considers that waiver as income and corresponding tax becomes payable. Many of the homeowners resorting to a home loan modification are not aware of the tax implication at the time of entering in to a revised contract, and as such, they might be in trouble during the tax season.

In a ruling, the IRS made it clear in 2007 that loan modifications will not be treated as “prohibitory transactions”. IRS also stated that ruling applied to all such mortgage loans that were contracted when the sub-prime boom was at its peak between January 2004 and June 2007, and to those loans that were due for adjustment beginning from January 2009 to June 2012. In case, your mortgage loans fall either into the first category or to the second category, then there is no need for filing a declaration 1099 stating the change as “taxable”.

Nine Things to Consider Before You Choose a Loan Modification Company

It does not take long for opportunistic people to cash in on any given situation. The present is a great opportunity for such scam artists to swindle people who are looking for loan modifications. Most of us are looking at modifying our loans thanks to the high loan rates, looming foreclosures and mortgage loans which value more than our property.

Most of the recently founded loan modification firms are boiler room operations with genuine firms far between. So how do you determine which of these are genuine and which are out to grab your money.

Look for the answers to the following nine questions you will be able to separate the wheat from the chaff.

1. What kind of an organization are they? Are you dealing with a law firm, an independent processing firm or a broker?

Brokers and other independent companies are not bound by legal and ethical rules that bound a law firm. A thorough background check is recommended before you decide to part with your money.

2. How old is the firm in the modification business? Does it provide other services as well?

Make it appoint to deal with a law firm which has been in the modification business for the last 10 years, at least. You need someone with exhaustive experience with real estate law. No one but an attorney can represent a home owner who has been issued a Notice of Default?

3. Is the firm bonded or licensed?

Do not interact with a firm without a license or which is not bonded to the state.

4. Is the firm giving you a written contract?

You need a written contract which clearly states what actions the firm plans to take on your behalf. A complete written disclosure is essential before any action takes place.

5. Does the company have approval from the Dept. of Real Estate, to collect loan modification fees?

You should never deal with a company which is not certified to collect loan modification fees upfront.

6. Is the company directly involved in negotiation with the lender or are they out sourcing it?

A company which is outsourcing negotiation has no real control over the proceedings. You do not need to deal with the likes of such.

7. How thorough are they in evaluating your situation?

A knowledgeable and experienced attorney from the firm should have spent quality time with you reviewing your specific conditions and objectives. A genuine firm will not take up your case if it does not meet the specifications required.

8. Does the firm offer you a guarantee?

This is the one thing which should scare you off completely. No firm can guarantee how a lender will react to your case.

9. Does the company keep you updated once the process of modification starts?

Your contract should specifically deal with this. A contact person who will be responsible for answering your queries should be marked out.

Ask all the right questions. Nothing can replace your prudence and research before you decide to pay for the services which can have a profound effect on your home proprietorship.

Getting to know ‘Private Mortgage Insurance’ better

Mortgage Insurance is one such cost that is often ignored by home buyers while planning to buy a house. The Private Mortgage Insurance helps in paying off the mortgage amount when the buyer defaults on repaying the loan amount. This insurance is like a safety net to the lender who helps the buyer pay more than 75% of the appraised value of the house.

There are a set of rules and regulations regarding Private Mortgage Insurance (PMI). However, rules differ in different states. These rules are to be understood thoroughly to assure a hassle free time before and after buying the house. Some common confusion surrounding PMI are answered in the following parts of the article.

-Who pays for the PMI?
Usually it is the buyer who pays for the PMI because it is the buyer who acquires about 80%of the money from the lender and therefore that makes him responsible for repaying it back to the lender. But, at times, even the lender can pay for the PMI depending on the kind of deal between the buyer and the lender.

-What are the costs of PMI?
Consider an example $100,000 is the mortgage amount. A regular mortgage insurance costs about 0.5% of the total loan amount. That comes to about $500. This amount will be paid for the first year. One good thing about this insurance is that the insurance amount decreases with the passing of the years as the mortgage amount decreases over the years.

Payment of PMI premium
PMI premium is usually paid at the end of first year. For the remaining years, it is paid monthly along with the mortgage payment.

How long should one pay the premiums?
It all depends on the state in which you stay and also it to differs between lenders. Generally, one can stop paying the premiums when he pays about 25% of the worth of the house. Apart from this, factors such as delayed payments or other liens against the house also determines the
PMI duration.

Cancellation of PMI
The PMI has to be terminated by the lender as soon as you pay 78% of the appraised value of the house. This rule is as per the rules laid by HPA.

Things one should press the lender before taking a PMI loan:

-You must be tabbed about the cancellation date of PMI

-You must be informed about the automatic termination date of PMI

-You must be informed if PMI is cancelled automatically

-You must be informed where one can cancel the PMI

So, the bottom-line is that, PMI should play a major role in your house buying process and at the same time, you must understand the rules and regulations for choosing a right PMI that is suitable for you.

But, keep this in mind that if you ever fail to re-pay in time, help is there. In the US, a lot of effective financial companies are actively offering loan modification service. So if your PMI fails for any reason, get contact with a loan modification company.

Are you planning to take a mortgage loan for your house? Or you already took a loan and failed to re-pay in time? In both the cases, what you need up front is a good knowledge on the concept.

For a start, a ‘mortgage loan’ is a loan sanctioned by a lender against a property including the land and the house. The property is regarded as a security for the debt. The lender holds the legal rights on the property during the loan period, if the borrower defaults the loan; the lender claims the ownership of the property. You should make an extensive research and get acquainted with the terms, conditions, and the miscellaneous costs of the loan. Make sure you have a good credit score, estimate your income and savings, and see that your debt to income ratio is in acceptable limits. This information will let you know, the amount you can spare for the monthly bills.

The next thing that you should do is, search extensively for the details of the companies, types of loans, rage of interest rates. You can mail or just call to a toll free number or go through a FAQ section in the website to get your doubt cleared about the company or the loan terms.

Some of the alternative sources to get informed about mortgage loans are online sellers, property resellers, local banks, and credit unions. You can even be guided to a local lender through a realtor or a friend. Finally, you can access the Federal Reserve website for information. These websites will give you a comprehensive idea about the mortgage loans and how to get one.

Once you have a comprehensive idea about the terms, conditions and miscellaneous fees, you can deal with any lender for better deals. What costs can you skip for a better mortgage deal? Concentrate on your interest rates and principal amount. A better credit score and a down payment of more than 20% of the loan will get you a loan with better interest rates. The value of the real estate and the down payment made is a factor, which you should be concerned about, get prepared with your savings at least two months before the down payment.

Your monthly bill consists of four parts, provided you use an escrow payment option. Escrow is a pre-payment of one party to other party, i.e. between the lender and the borrower. The payment to the other party will only pass on, if the contract between the two is accomplished.

1) The monthly interest
2) Principal amount
3) Taxes on your property - the government levies taxes on your property to meet fire department, schools and roads.
4) Insurance costs – your property should be insured against all disasters or fire.

These are the major costs, which you should meet, in your monthly payments. You should even pay the closing costs, which are called as good faith estimate. Make sure you are aware of all the costs that you should meet for a mortgage loan. Make sure you have a comprehensive idea about the mortgages loans. This is the best way to not to loose your house.

In any case, if you fail to re-pay and your lender is giving you a hard time, do not panic. There are financial companies available those assist on loan modification. They will take care of your problem. So, why worry?

The Beginning

Do you dread the arrival of the postman every morning? Waiting in fear of a new mound of bills coming through your letter box? Many homeowners have found themselves in a position where they are all of a sudden struggling to pay their mortgages each month. You may have been paying your mortgage on time for several years without any problems, only to find that a change in your circumstances has made it hard to get the money together. The recession is to blame for the struggles of many people in the world; being forced to take pay cuts or even being made redundant. For others, reasons may be closer at home. A divorce or a new baby in the family is two circumstances that may quickly change your financial situation. Whatever the reason is, struggling to pay your mortgage each month can be very worrying, and hiding away in hopes that the problems will simply go away is futile. Financial struggles need to be taken control of quickly to avoid any escalation of the problem.

Other Options

Many people automatically think of bankruptcy as the only option to getting out of their financial difficulties. There is however other alternatives which are much more favourable to declaring yourself bankrupt. Becoming bankrupt affects peoples’ lives for years down the line; affecting their credit ratings and their ability to buy further property. An alternative solution would be to go for a loan restructuring on the existing mortgage. Mortgage modification is the perfect way to avoid bankruptcy and to get the necessary help in reducing your monthly payments.

Loan Modification

Loan modification involves the process of changing the terms of an existing mortgage. The new terms will be discussed and accepted by both the home owner and the lender. Restructuring your loan can involve several single changes or simply a combination of several. Some of the main things that can be changed under the new terms are the interest rates and the repayment term time. For a homeowner, extending the time to repay the loan can bring down the monthly payments drastically. Reducing the interest rates of the loan can also make a big difference to the monthly repayment amount. Lenders are often very willing to help homeowners out of financial difficulty and are often willing to forgive any previous missed payments in order to start again. This can be just the help a property owner needs to get their finances back in order and avoid going bankrupt or affecting their credit scores.

Getting Your Life Back on Track

Loan modification is often the best solution for struggling homeowners, and enables them to get their lives back on track. Making a few simple changes to the terms of a mortgage can be the easiest way to get finances in order, and make monthly repayments that little bit easier.

The Struggle

There are times in the lives of most people when financial struggle comes into play. Whether it be the loss of a job, a decrease in wages, a new addition to the family or an excess of bills; struggling with mortgage payments can be very stressful. The home is one of the most important things that people can own, and therefore being unable to pay for it can prove to be disastrous. The thought of losing the house can be too much to bear, and forfeiting on payments will only make things worse. For anyone who is struggling to repay their mortgages, help is readily available, and all that needs to be done is to act quickly.

Options

For people who are genuinely struggling to pay their bills, there are several options available which may help. For many people who have been hit by the recession or by a decrease in wages, a simple loan modification may do the trick. Imagine being able to decrease the amount of money coming out for mortgage payments each month. Would this be helpful? For many people something as simple as loan restructuring can provide the answer to their financial struggles.

Mortgage Modification

Being able to change the terms of your loan may be helpful to people struggling with debts. Loan modification involves the process of changing the terms of an existing mortgage to new terms acceptable by both the home owner and the lender. There are several things that may be changed when undergoing mortgage modification including the interest rates and the repayment term time. Loan restructuring may also include the lender forgiving any forfeited payments; giving the home owner a chance to begin with a clean slate.

Reasons

There are many reasons that people opt to undergo loan modifications, and often this simple solution can be the key to solving financial difficulties. For people who are in really bad financial problems, loan restructuring can be a good way to avoid foreclosure. If they can bring down their monthly payments, or even change the amount that is still outstanding; loan modifications can be the key. For individuals who have just had a new addition to the family, mortgage modification may also free up some extra cash. Having a baby can be expensive, so paying out less for a mortgage each month may prove to be very useful. Planning ahead is beneficial, and if you expect to encounter a change in financial circumstances, a simple loan restructuring can be a good way forward.

Avoiding Difficulties

There are several ways to avoid bankruptcy and foreclosure, and mortgage modification is often the best one. For anyone who has been struggling to pay their monthly loan repayments, considering loan restructuring is a good alternative that will also free up some of the available finances.