Brought to you by: Breez DeGuzman

Becoming a homeowner is one of the happiest events in many people’s lives. But when times get tough, it can be difficult to scrape up the money to pay mortgage payments each month. If you’ve accumulated enough equity, you can sell your home at a profit and get on with your life. But what happens if you owe more on your home than it’s worth?

Many homeowners face the heart-wrenching decisions associated with these problems. Some choose to negotiate with their lenders, hoping for a solution that will allow them to catch up on payments and keep them in their homes. Others feel hopeless, believing that there is no chance that they will be able to keep up payments even with help. Those who fall into this category often choose to walk away from their homes.

Losing your home brings forth a deluge of emotions. It’s a sad event, and it may also make one feel angry or ashamed. It’s certainly not ideal, yet desperate homeowners often feel that they have no other alternative. But in most cases, there is help available.

Talking to your lender could be more fruitful than you might imagine. With the abundance of foreclosures going on today, many are willing to go to great lengths to help homeowners stay in their homes and meet their obligations. Paying extra each month to catch up on payments is one option, but it may not be the only one offered. The lender may be agreeable to bringing a homeowner back to current status and accepting lower payments for a longer period of time, or even lowering interest rates to reduce payments and the amount owed.

If your lender isn’t helpful, there are non-profit organizations that can help. They employ trained negotiators that know what it takes to persuade lenders to work with borrowers. They can also inform you of your legal rights, which is something that lenders may hesitate to do. These organizations usually charge nothing for their services.

The Consequences of Walking Away

If you do end up walking away from your home, there are certain consequences that you should be aware of. One of the most significant is a foreclosure’s effects on your credit record. You can expect your credit score to drop by a few hundred points, seriously harming your chances of getting any kind of credit for several years. In most cases, the foreclosure itself remains on your credit report for 10 years.

There’s also the chance that you could be held liable for the difference between the profit the lender makes from your home’s sale and the balance of your mortgage. Lenders often sell homes to the highest bidder, and if that bid doesn’t satisfy the mortgage amount, they will want to recover the rest. In some cases a lender may agree not to pursue payment if the borrower agrees to a deed-in-lieu of foreclosure or a short sale, but they are under no legal obligation to do so.

Sometimes, walking away from your home is unavoidable. But in most cases, there are alternatives available. If you find that you’re in danger of losing your home, talk to your lender or a professional immediately. You might find that your chances are better than you thought.

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In the best of times, foreclosures happen. When the economy tanks, they happen much more frequently. This is devastating to those who lose their homes, but it presents an opportunity for real estate investors and those who want to get a great deal on a home for themselves.

It’s no secret that foreclosed properties are sold at much lower prices than your average home. But are they really worth it? Here are some pros and cons to think about before you spend your money on a foreclosure.

Pros

* You can get a great deal on a home that is under foreclosure. These properties are often sold at auction, going to the winning bidder. So instead of talking the seller into coming down on the asking price, you simply have to beat the prices that others are willing to pay.

* Properties that are held by the bank and not sold by auction are often easy to finance. The bank may offer favorable financing terms since it is in their best interest to sell quickly.

* If you can catch a home in pre-foreclosure (the time between the issuance of a Notice of Default and actual foreclosure), you might be able to negotiate a good deal with the owner. He will likely want to prevent foreclosure so that he can salvage his credit rating, so if you can offer him a deal that the lender will accept, he will probably be willing to consider it.

* The previous owner will often be out of the property by the time the foreclosure sale takes place. That means that you can move in or start renting it out immediately after the sale is complete.

Cons

* Foreclosure properties are often in poor repair. If a homeowner can’t afford to pay his mortgage, there’s a good chance he hasn’t been able to afford to maintain his home properly, either. That’s why it’s so important to inspect before you even think about buying.

* If the former homeowner was evicted (or worse, you have to evict him after purchasing the property), he may retaliate by trashing the home. He may also remove fixtures to sell or use.

* Properties purchased at auction must be paid for immediately. If you don’t have cash or a line of credit to work with, you won’t be able to participate.

* If the property is sold at auction, there’s the chance that the price may be driven up too high. To avoid overpaying, learn as much as possible as you can about the property. Decide what a reasonable price would be, and don’t go over that figure.

The foreclosure game is one that can get you properties for less. But if you’re not careful, it’s easy to get burned. Doing your homework is essential if you want to come out a winner.

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Owning a home has long been a major component of the so-called “American Dream.” It’s true that home ownership is fulfilling and liberating. But as anyone who is making mortgage payments can tell you, it doesn’t come cheap.

During the good economic times, banks practically handed mortgages out like candy. This made owning a home accessible to more people, but it also led to an alarming number of foreclosures. Today, more consumers than ever before are aware of the pitfalls of buying more home than they can afford.

The amount of home an individual, couple or family can afford depends on a number of factors. These include:

* Income – Most prospective home buyers are aware that their income plays a significant role in how much home they can afford. Simply put, if you don’t make enough to pay your mortgage payment each month, you can’t afford the house. If it were as cut and dried as that, settling on a price range would be relatively easy. But there are more things to consider.

* Down payment – A key factor in how much home you can afford is how much of a down payment you can make. Most conventional loans require a down payment of 20% of the purchase price. That’s not an amount that most people can save up in a few months’ time. Some types of loans allow for a lower down payment, or even none at all. But in exchange for that concession, you’ll have to pay private mortgage insurance (PMI) and possibly a higher interest rate.

* Other debts – All other things equal, two borrowers who have different amounts of debt will need housing in different price ranges. Most experts agree that your total amount of debt should not exceed 36% of your income. So while someone with no other debts could afford to spend the entire 36% on housing (although that’s not recommended), someone with a 15% debt-to-income ratio could only afford a mortgage equal to 21% of his income.

* Interest rate – When interest rates are low, one can afford a larger mortgage than when they are high. This is something over which we have no control. But if you are considering buying a home and interest rates are lower than the norm, moving forward now instead of waiting could be to your advantage.

The 36% debt rule is known as your back end ratio. Your front end ratio is also worth considering. This rule dictates that your mortgage payment and other housing expenses, including homeowners’ insurance and real estate taxes, should add up to no more than 28% of your gross income. This makes for a quick way to estimate how much of a mortgage you can afford. Simply multiply your monthly income by .28 and you’ll have a rough idea of how large of a payment you can afford each month.

Living within one’s means is always important, and that’s especially true during uncertain economic times. Taking the time to carefully consider how much you can afford to spend on a home could save you a great deal of anguish in the future.

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Reverse mortgages have existed for a few decades, but only recently have they received a significant amount of press. Touted as a way for senior citizens to utilize the equity in their homes, reverse mortgages have become increasingly common. But is a reverse mortgage right for you?

As the name suggests, a reverse mortgage is pretty much the opposite of a regular mortgage. Instead of taking out a loan to buy a home, you put up your home as collateral and receive money. But unlike a home equity loan, you do not have to make monthly payments. No payment is due until the borrower dies, sells the home or moves out for twelve months or more. When one of these events occurs, the loan must be paid in full, including accrued interest. This is accomplished by selling the home or obtaining a traditional mortgage.

The proceeds of a reverse mortgage may be distributed in a few different ways. The borrower can take a lump sum payment. He can request a line of credit to use as needed. Or he can elect to receive monthly payments. Some lenders will even allow you to receive payments by two different methods, such as half in a lump sum and the other half as monthly payments.

Requirements for a Reverse Mortgage

Unlike other mortgages, a reverse mortgage does not subject the borrower to income requirements. Since there are no monthly payments, there is no need to verify income. The amount a homeowner is eligible to borrow is dependent on the equity he has in his home.

There are, however, a few requirements that must be met. These include:

* The borrower must be at least 62 years of age. If there is a co-owner who is under 62 years old on the home’s title, that person’s name must be taken off before the loan can be made.

* You must have a certain amount of equity in your home. If you have an existing mortgage, it must be paid off. But you can use the proceeds of the reverse mortgage to do this.

* There are certain criteria that the home must meet to qualify. The owner must live there, and if it’s a multi-family dwelling, there must be four units or less. Manufactured housing must meet certain requirements to qualify.

* Before a reverse mortgage can be made, the borrower must undergo counseling approved by the Department of Housing and Urban Development (HUD). The purpose of this counseling is to make sure the borrower understands how the reverse mortgage works. When completed, the borrower receives a certificate that must be presented to the lender.

A reverse mortgage can provide funds to senior homeowners to use any way they choose. They do not have to make monthly payments, and they can remain in their homes for the rest of their lives or until they choose to move out or need to do so for long-term care. But it’s very important to understand all of the implications of a reverse mortgage before making a decision.

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Planning ahead is key to a successful, affordable vacation.  Once you decide where you’d like to go and what it will cost (check online sources for bargains and travel tips), you can begin saving weeks, months, or even years ahead.  With a realistic budget and a commitment to save, you can take that vacation you thought you could not afford. 

Here are a few tips to help get you started:

* Save your coins

It is amazing how fast loose change accumulates when it isn’t spent.  Decide that you are not going to spend coins of any type when you pay for something with cash, and pay only with paper money (if something costs $3.50, give the clerk $4 even if you already have change jingling in your pocket).  Designate a large, sturdy container that is hard to access (such as a plastic water-cooler jug with a narrow top that won’t accommodate a pilfering hand), and toss in your daily loose change. 

When it comes time to cash in, take the coins to your bank – most banks will put your change through a coin rolling machine for no fee if you have an account with them. 

* Develop and/or review your family budget

You need to see numbers on paper to get a grip on expenditures and income, and to see tangible ways to glean savings.  Review unnecessary expenses and see where you can cut back – if you order pizza once a week, make pizza at home instead; if you eat lunch out during your workday, take your lunch several times a week and put the money you save toward your vacation.  Think of the meals you will enjoy on your vacation because you abstain from eating out now. 

The entertainment budget is another area where cutbacks are feasible – consider cutting back on computer games, cable TV, or movie attendance.  After all, you are saving toward a vacation that will provide memorable entertainment and enjoyment – for each movie you decline to attend now, for example, you are “attending” a show at your vacation destination.

* Over-save by approximately 10%

It’s good to be prepared, and unforeseen circumstances and unexpected fees can take a bite out of the vacation budget and may end up as credit card debt.  While it’s impossible to foresee every possible glitch, over-saving by around 10% will provide a cushion.  And if no unexpected expenses pop up, you’ll have some extra spending money. 

* Turn off the air conditioner and turn on the fans

When it’s not too hot during the spring, summer and early fall months, a significant amount of money can be saved by turning off the central air conditioning (not just raising the thermostat), opening the windows and turning on fans.  Electric fans and even electric window air conditioners use far less energy than central air conditioning, resulting in significant monthly savings you can put toward a comfortably air-conditioned hotel room on your vacation. 

* Sell your excess items

Whether it’s via eBay or yard sales, selling unused clothing or household items is a way to make money where everybody wins.  You get rid of excess clutter and save money toward your vacation, and someone else gets a needed item at a great price.

Once you calculate how much your vacation will cost and how much you can realistically save each month, you’ll know how much time you need to save up for your vacation.  You may be surprised at how quickly you can save.

Brought to you by: Breez DeGuzman

Owning a home is a goal to which many of us aspire. But unless you can afford to pay for a house in cash, you’ll probably have to take out a mortgage. This has scared away many a potential homeowner. And those that do go forward often view the mortgage as a necessary evil.

Debtors often consider paying off their mortgages early. This can be a good economic strategy, but there are some disadvantages to it as well. Here are some things to consider if you want to become mortgage-free.

Pros

Paying off your mortgage leaves the lender with no claim to your property. Your home is truly yours and yours alone, and you don’t have to worry about foreclosure due to the inability to make payments. You simply can’t put a price on that feeling of security.

The more quickly you pay off your mortgage, the less you will pay in interest. Any extra principal that you pay each month is that much less that you will have to pay interest on for the remainder of the mortgage term. If you consistently make extra principal payments, it could save you thousands of dollars over the life of the loan.

Once you’ve paid your mortgage in full, it’s like having several hundred dollars in extra income each month. You’ll have more money to put toward retirement, remodel your home, or spend any other way you’d like.

Being without a mortgage gives you greater freedom. You could sell your home and pay cash for another one. You could build up extra savings and pursue a new career. Having your mortgage paid off may even open the door for early retirement.

Cons

When you pay off your mortgage, you can no longer take tax deductions on the interest paid each year. For those who itemize deductions, this can cause a major change in your tax situation.

With the right investments, you could come out ahead by paying the minimum on your mortgage each month and investing the rest. If an investment offers returns greater than your mortgage interest rate, you would theoretically be better off going this route. It’s important to note, however, that most investments with higher returns are not guaranteed.

The more money you’re paying toward your mortgage, the less you’ll have for other expenses each month. You may have to put off buying a new car or saving for your children’s education. Are these things you can live with?

Putting money into your home makes it harder to access funds when you need them. If the need arises you could sell your home, but that rarely happens as quickly as you would need it to in an emergency. You could also take out a home equity loan, but that defeats the purpose of paying off your mortgage early.

Paying your mortgage off early comes with some opportunity costs. But for many homeowners, the benefits far outweigh the disadvantages. They can save money without having to be savvy investors, and they get the peace of mind that comes with being mortgage-free sooner.

With the right investments, you could come out ahead by paying the minimum on your mortgage each month and investing the rest. If an investment offers returns greater than your mortgage interest rate, you would theoretically be better off going this route. It’s important to note, however, that most investments with higher returns are not guaranteed.

Brought to you by: Breez DeGuzman

Home prices skyrocketed during the last decade; sadly, to the point where the distance between what people earned and how much a property cost was grossly out of proportion, when compared to any other period of time in recent history. With the crash of the market, this bubble burst and tons of houses were foreclosed and thousands of others were put up for sale in a desperate attempt by homeowners to cut their losses before it was too late. As the market continued to spiral downward, fewer people were interested in buying something with a value that was dropping, and this caused the market to continue falling.

One way that homeowners are taking back control of the situation is through home exchanges. This is a process of searching through a list of homes that are potential trades, finding one that you would like, and hoping that the homeowner will feel the same way about your property. When it works, paperwork is drawn up, loans are paid off and financing obtained, and the home trade is made. Because the homes are typically around the same price, there is little loss with the home swap and you can eliminate other expenses that tend to come with the purchase of a new home.

One major difference when you have a home for sale versus one for trade is the cost. You save money by not having to pay a commission to a real estate agent. Instead, the two homeowners will do all the work and search out a situation where both parties want to swap houses. Once an agreement to trade homes looks imminent, a real estate lawyer should be called in to ensure that the homes exchange transaction goes smoothly and that neither party will suffer any losses.

On the website, www.craigslist.com, there has been an explosive growth in people who are interested in trying to exchange homes. Either their houses are for sale yet have had no interested buyers, or they want out of the whole real estate market. This increase on craigslist is about thirty percent, which is a sizeable jump upwards and really shows that there are many people out there with homes they can’t afford, or who want to make a change but can’t in the current situation, or are not happy with the traditional way of doing things. It is very likely that home swapping will become even more popular over the next few years as people come to realize that the market can be controlled by them, and not the other way around.

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For a long time, it seemed like banks were handing out mortgages on silver platters. Even those with not-so-good credit could find a lender who would work with them. This seemed like a dream come true for those who wanted to become homeowners. But when the housing market went south, lenders began to be more cautious.

Today’s housing market is a far cry from what it was just a couple of years ago. Fewer lenders are willing to serve those who do not have excellent credit scores. Those who are fortunate enough to get a mortgage without perfect credit have to contend with higher interest rates.

But looking for a great mortgage deal is not a lost cause. For those with good credit, there has hardly been a better time to get a mortgage. Interest rates are low, and lenders are willing to compete for the business of well-qualified borrowers. Here are five things you can do to get a good deal on your mortgage.

1. Carefully examine your credit report. If there are errors, report them to the credit bureaus. If your credit is less than perfect, start working on building it up right away. Catch up on delinquent accounts, and make all payments on time for a few months. These measures can make a big difference in your interest rate.

2. Compare rates online. You can find rates for many lenders on the Internet, and some websites allow you to compare rates and terms side by side. Even if you don’t like the idea of borrowing from an online lender, you can find rates for banks with branches in your area. At the very least, this will give you an idea of what to expect.

3. Visit some lenders in person. Most offer several different programs, so it pays to sit down and discuss your needs and finances with them. Determine the best deal a lender can offer you, and get it in writing. Then visit more lenders and compare results.

4. Don’t forget the local banks. Smaller banks tend to minimize their losses by only working with highly qualified borrowers. This means that they can afford to offer lower interest rates.

5. Remember that there’s more to a great mortgage deal than a low interest rate. Make sure you understand the terms of the loan, especially when it comes to other costs such as points, closing costs and private mortgage insurance (PMI). If these costs are high, they could negate the effects of that stellar interest rate.

Getting a good deal on a mortgage can be a time-consuming task. But the rewards may be measured in thousands of dollars. In today’s housing market, it literally pays to shop around.

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If you’ve ever had credit in your name, there’s a good chance that you get credit card offers in the mail regularly. Some charge interest rates so ridiculous that it’s amazing they’re still in business. Others offer deals that seem too good to be true, such as 0% balance transfers.

Zero interest deals do exist, though. In fact, they’re pretty common. Credit card companies offer such deals because they provide an incentive for those who already have credit card debt to get one of their cards. But should you take the bait? Here are some points to consider when making that decision.

Pros

Zero interest is almost certainly a better deal than you’re getting with another card. Even if it’s only for a limited time, it could save you quite a bit of money. As long as the non-promotional interest rate is the same as or less than your current card, you should come out ahead.

If you’re planning to pay off your debt, transferring your balance could allow you to do it more quickly. Instead of contending with compound interest until you finally get it all paid, you can put the entire amount of each payment toward the principal.

Having another credit card account reduces your outstanding debt to available credit ratio. This is good for your credit rating, and can help you get lower interest rates on mortgages and other types of loans.

Cons

For those who already have too much debt, getting another credit card could be a bad idea. That paid-off credit card might look like an open invitation to charge. If you accept that invitation, you could end up with much more debt than you had to start with.

Zero interest doesn’t necessarily mean free. Most cards charge a fee each time you transfer a balance. These fees are usually a fraction of the regular interest rate, but if you transfer a large balance it could add up to a lot of money.

Some cards that offer 0% balance transfers make up for it by charging high fees for other things. They may jack up your interest rate if a payment is late or returned by the bank, or they could charge high annual fees. Be sure to read the fine print, because they are required by law to disclose such things.

Transferring a balance to a zero interest credit card can save you lots of money. But if you just charge up the original card again, you’re worse off than you were to start with. Even if you don’t, fees could add up to more than you realize. Before you accept that balance transfer offer, make it a point to do some research.

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Investing in energy-efficient appliances not only benefits you, the consumer, but it also benefits the environment. Here are just a few of the advantages to investing in greener appliances:

* Lower utility bills

Because of federal regulations, newer appliances are less expensive to run than older ones. Consider refrigerators – according to the American Council for an Energy-Efficient Economy, a typical refrigerator with top-mounted freezer made in 1990 uses twice the energy of a modern refrigerator. Thus, replacing old appliances with new, energy-efficient ones will save you money and help finance the appliance. In the case of dishwashers and washing machines, the newer models not only use less electricity but they also use less water.

* More money in your pocket

In these uncertain economic times, being able to keep more of your hard-earned money is a definite advantage. While the purchase of a new, energy-efficient appliance will probably be a significant expense, it will pay for itself long before its average lifespan (15 years) is over. Also, there are federal tax credits available to green consumers, according to energystar.gov.

* Support of energy-efficient manufacturers

When you spend money on an energy-efficient appliance, you are helping to secure the future of the company that manufactured it. The consumer dollar speaks, and this sort of purchase sends a message to other manufacturers to produce more energy-efficient models. As the demand increases, the supply will also increase, and ultimately the price for such appliances will come down. Your purchase helps ensure that these appliances will be available and affordable in the future.

* Less use of fossil fuels

Fossil fuels such as coal are burned to make electricity, and these fuels will not last forever. We are, however, still dependent on them as our primary source of energy. As researchers continue to seek alternative energy sources, you can help “buy us some time” by investing in appliances that require less energy, and thus use less fossil fuel.

* Fewer emissions and less pollution

The burning of fossil fuels to make electricity produces emissions and pollutants, such as sulfur dioxide and carbon dioxide. Sulfur dioxide is a by-product of burning coal, and when it rises into the atmosphere it mixes with moisture and forms acid rain. High levels of carbon dioxide in the atmosphere have been implicated in global warming.

In fact, the Environmental Protection Agency officially declared fossil fuel emissions a health threat this past April. If your appliance uses less electricity, then it is ultimately using less fossil fuel, and that means fewer emissions, cleaner air, and a more stable climate.

When you decide to make your purchase, look for the yellow EnergyGuide that is required on every new appliance. This will tell you exactly how much energy the said appliance is expected to consume. You can fully expect that your household utility bills will decrease, and your peace of mind will increase – because investing in energy-efficient appliances is an investment in the future.