4 Reasons Why Your Underwater Mortgage Won’t Be Saved By Eminent Domain

Underwater MortgageMany home owners have been affected by the recent housing market crash. Many people have lost their homes to foreclosure, while others ended up owning a home that is worth much less than it did when they bought it. Having to pay back a mortgage loan for a home that is worth much less than it did before the crisis will make most home owners want to get rid of it. Unfortunately, selling your home for less than you owe, means that you will have to pay back the difference to your lender.

Abandoning your home if your mortgage is underwater is a solution, but you will have to live with the consequences of foreclosure (Read: The Foreclosure Process). Having your credit ruined and not being able to take out a new loan for several years is not an option for most people. Because many home owners are underwater on their mortgage and facing foreclosure, many municipalities have started looking for solutions to avoid having to deal with whole neighborhoods of deserted homes. One of the ways in which counties and cities are trying to help home owners who own more than their homes are worth is eminent domain. Click here to read more.

What is Eminent Domain?

The power of eminent domain allows the government and its agencies to take private property and use it in a way that benefits the public. For example, the government can use a seized property for a school, a park, a new road and more. The owner of the property that is seized by the government under eminent domain is entitled to compensation, which is usually the fair market value of the property.

The government agency that is interested in your property hires an appraiser who will inspect and appraise the property, after which the organization makes you an offer. The offer will generally be low, but there is some room for negotiations. After the negotiations, if you are not satisfied with the offer, the organization will schedule a public hearing in which it will have to prove why your property is needed for public use. After the public hearing, the government agency will submit a complaint against you in court, which you can challenge, but it will be most likely overruled. Your attorney will have to obtain appraisal reports from other appraisers in order to determine the property’s fair market value.

Eminent domain can also be used to help home owner whose mortgages are underwater. Some analysts say that underwater mortgages slow down the economy, so using eminent domain will help the economy and allow people to stay in their homes. Others say that using eminent domain to save underwater mortgages will hurt the economy because lenders will react to this by increasing interest rates. Click here to learn more about the restrictions.

Reasons Why Using Eminent Domain Won’t Save Underwater Mortgages

Using eminent domain to save underwater mortgages was attempted in a few Californian cities back in 2012. The plan was abandoned because it didn’t receive the public support that was expected, and was strongly opposed by mortgage regulators Freddie Mac and Fannie Mae. While the plan to use eminent domain to come to the rescue of those with underwater mortgages sounds fairly good in theory, it has plenty of disadvantages. Here are the reasons why your underwater mortgage won’t be saved by eminent domain.

  1. The eminent domain process is very complicated. Many home owners won’t agree to this method because they probably won’t receive as much money as their home is worth at current market prices. Each home is different, has unique features, so designing a simple plan will be very difficult and will become bureaucratic.
  2. Eminent domain can be abused. Most people don’t support this plan because it can easily be abused, so some home owners may receive more than they deserve for their properties, or less. Also, home appraisals rely on the appraiser’s judgment, so there is a chance that mistakes will be made, and many properties will be appraised incorrectly.
  3. Lenders and mortgage regulators oppose this solution. Fannie Mae and Freddie Mac, who guarantee 90 percent of all mortgages issued in the United States, do not agree with using eminent domain to save underwater mortgages, so they are threatening with limiting business activities in cities that use this solution.
  4. The government will be put in an awkward position. Because mortgages are contracts between lenders and borrowers, a government intervention will not be well received by most lenders. The government usually refrains from interfering with private contracts.

Saving underwater mortgages by using eminent domain may seem like a good idea, but there are serious repercussions to following this plan, and most cities will most likely try other methods of helping those with underwater mortgages (Read: How These Alternatives Can Help You Avoid Foreclosure). Eminent domain has its uses, but using it to save underwater mortgages will only cause controversy and put the government in a bad light.

Want to Buy a Foreclosure? Read These Important Tips First!

Want to Buy a Foreclosure-Read These Important Tips First- 150x150Low interest rates and a large inventory of foreclosed homes seem very attractive for those looking to buy a home for a low price. Whether you are an investor who is looking to make a profit or a simple home buyer looking for a home for his or her family, foreclosed homes are a great alternative to buying regular homes. However, low prices can quickly make you forget some essential home buying aspects, and you can quickly end up with an expensive problem on your hands. You can get some really great deals on foreclosed homes, but you should pay even more attention than when buying a regular home.

Buying a foreclosed home requires a certain degree of experience, in order to protect yourself from buying a home that will require extensive repairs or has some major issues. Here are a few tips that you need to keep in mind when buying a foreclosure.

1. Don’t expect to find out a lot about the home. Foreclosed homes are owned by banks and there won’t be any disclosures when buying such a home. You won’t know who lived in the home before or what kind of people they were. Unless you do some research on your own, you won’t be able to tell what kind of neighborhood the home is located in. You are pretty much buying a home blindly, without finding out too much about the property’s past or present condition.

2. Hire someone who is specialized in foreclosures. Buying a foreclosed home is different than making a normal home purchase. Hiring an agent that specializes in foreclosures can make this process significantly easier and save you from some trouble. When making a purchase like this, you need to move quickly and have all the paperwork ready when it’s needed.  A real estate agent specialized in foreclosures can be of great help with having everything ready on time. A professional can also use his or her contacts in order to help you find more foreclosed homes than you would on your own.

3. Have financing available before you start looking at foreclosed homes. Just like you would when purchasing any other home, you should be at least prequalified for a loan before shopping around. By doing this, you will know how much you can afford to pay for a foreclosed home, which will make searching for the right one much easier. More importantly, you will be able to make the purchase much quicker, and lower the risk of losing the home to another buyer.

4. Prepare for repairs and improvements. Many home owners whose homes were foreclosed might have left the home in a poor state, or even stolen some of the appliances or fixtures. You, the buyer, will be responsible with home repair and replacing all of the missing or broken appliances and fixtures. An alternative would be to apply for a 203(K) mortgage, which is designed for those who are buying a home that is missing certain elements, like toilets, or needs other repair work.

5. Determine if a foreclosed home is right for you. Especially if you are a first time home buyer, buying a foreclosed home might not be your best option. Most people, especially first time home buyers, generally want a home that they can move into without having to do many modifications or repairs in the beginning. Most foreclosed homes will almost always need some sort of repairs or improvements, so you should ask yourself if that is something that you are willing to do before buying a foreclosed home.

Foreclosures can be good deals as long as you know what you are doing, and have proper knowledge of the process of buying a foreclosed home. You have to know how to prepare for such a purchase and what problems you may encounter in order for this to be a great alternative to making a regular home purchase.

Mortgage Counseling Services You Need

Mortgage Counseling Services You Need- 150x150Many people wouldn’t be able to afford a home without mortgage loans. Mortgages might come with some disadvantages, but are a great way of making sure that you have a roof over your head, and something to leave your kids. Paying off a mortgage is a great feeling, the feeling that you are truly a home owner, but getting there requires some careful budgeting, because there will always be the risk of not being able to afford paying your mortgage anymore and losing the home.

Being a responsible home owner is mostly up to you, but looking for help when you think you need it is nothing to be ashamed about. Just like marriage counseling can save a marriage, mortgage counseling can help you make the best decision regarding what type of loan to take out and what you can do to make sure that paying off your mortgage goes smoothly and with no major problems. Home buyers who receive mortgage counseling prior to making a home purchase are less likely to default on their mortgage, and less likely to even be late or miss mortgage payments.

Mortgage Counseling Services

You have many mortgage counselors to choose from if you need help understanding your mortgage or making sure that you make the right choice, but it is recommended that you visit a counselor that is government approved. By doing this you are making sure that you receive the most up to date and complete information.

Before setting up an appointment with a mortgage counselor, make sure that you gather as much information as possible about your mortgage, account balances and debt, income, and find your most recent tax return. Being able to show all this info to your counselor will ensure that your paperwork will be filled out much easily. These documents will also help your counselor work with you to determine a budget that accommodates your financial situation and needs. Here are the most important services that mortgage counseling organizations are offering.

  • Pre-purchase mortgage counseling. Many home buyers need help in deciding which type of mortgage loan to choose. Making sure that you pick the right one, with the right terms, is probably the most important thing you can do when shopping around for a mortgage loan. The down payment that you will have to make, the interest rate that you will be paying, the length of the repayment period, and all the fees that you will be paying must be discussed before you decide on a loan, in order to find out if that type of mortgage will be right for you.
  • Post-purchase mortgage counseling. A large part of your income will go towards paying your mortgage each month, and some home buyers might find that a little overwhelming. Post-purchase counseling can help you better manage your monthly expenses as well as give you advice regarding mortgage refinancing and other loans that you can take out. This type of counseling is also very important, and can make a big difference if you are struggling, or are unable to make a decision regarding your mortgage loan.
  • Mortgage refinance counseling. Refinancing is a great way of lowering your monthly mortgage payments by taking out a new mortgage loan to replace your current one. Unfortunately, refinancing is an expensive process which can actually end up costing you more than you expected if you are not sure what you are doing. A refinance counselor will work with you to determine if refinancing is the right step, and how much you will be saving over your current mortgage rate.
  • Mortgage default counseling. At one point during your life, you may encounter some problems that will make paying your mortgage difficult. In order to avoid foreclosure, you can hire a mortgage default counselor, who will help you address the problem in the best way possible. When faced with losing your home, it would be better to get professional help than to try to do things yourself. Receiving the proper help in this situation can make a big difference and your chances of keeping your home will be much higher.

Unless you feel that you have good knowledge on the subject, mortgage counseling services can be very helpful and save you money and trouble in the long run. Being prepared when the time comes to take out a mortgage loan or refinance your mortgage makes a large difference over going in blindly and ending up losing money, or even your home. Mortgage counseling services are designed to help you become a home owner, and deal with the problems that may arise in the life of a home owner.

Financing Home Improvement- Which Ways are Best?

Financing Home Improvement-Which Ways are Best- 150x150Nowadays, financing a home improvement project can be done in several ways, all of which have their advantages and disadvantages. Which one is the best for you usually depends on several factors, such as the project’s cost, how much time the project will take, how much equity you have in your home and many more. Deciding which type of financing is best is entirely up to you. This article will describe several ways in which you can do it and give insight into which ways are often the best for most situations.

First of all, when starting an improvement project, the first thing that you need to do is create a realistic budget that you should strictly follow. Everything that you are planning for your home improvement projects should be stuck to once the budget is set. Changing your plans half way through can get very expensive and you may find yourself unable to finish your project. Also, when setting a budget, always overestimate costs. In very rare cases, you can end up having to spend less than you planned, but most of the time you will actually have to spend more. Having a budget will help you find out exactly how much money you need and ensure that the project is finished on time and without any major issues.

Whether you are building a garage or a pool, installing new appliances, or simply remodeling a kitchen or a bathroom, unless you have a large amount of money saved up, you are going to need financing. Find out what your budget is and how long the improvement project will take before looking at financing options. Here are the most commonly used methods of financing a home improvement project.

Cash

The most obvious choice is also the cheapest choice. Taking out a loan means that you will be paying interest and fees, making your home improvement project much more expensive. Whether you have it saved up, borrowed it from a friend or family member, cash will always be the cheapest way to finance a remodeling project. Also, because you are not using your home as collateral, you also avoid the risk of losing your home to foreclosure.

Credit Cards

With credit cards you avoid paying closing costs, as you would if you took out a loan, but interest rates will be much higher. Home improvement projects that only cost a few thousands of dollars are easy to finance with one or more credit cards, but you should only use this option when you are able to repay the borrowed money in a few months.

Personal Loans

Unlike mortgage loans, personal loans that are unsecured do not use your home as collateral. This means that, if you fail to repay what you have borrowed, your home won’t be at risk for foreclosure. Banks only offer unsecured personal loans for small amounts of money and the qualification guidelines are strict. Other lenders offer payday loans, which have very high interest rates.

Home Equity Loan

With a home equity loan you use your house as collateral, just like you would on a primary mortgage. The interest rate on a home equity loan is fixed and also tax deductible. Another downside besides having to pay an interest is that home equity loans require you to pay closing costs. Failing to repay the money, you risk losing your home to foreclosure.

Finding the perfect solution when it comes to financing a home improvement project can be difficult. Your best bet is to carefully assess your financial situation, determine how much money you have to spend, and take it from there. The best option would be finding cash for the project, but, if that’s not possible, there are a number of other ways in which you can finance your home improvement project.

Foreclosure with Property Liens and Second Mortgages- Find Out What Happens!

Foreclosure with Property Liens and Second Mortgages-Find Out What Happens- 150x150Many home owners need a second or even a third mortgage in order to cover the price of their home or for repairs and additions. Second mortgages are usually taken out to cover the high price of the home when a single mortgage just doesn’t cut it. Other types of loans, like a home equity loan, are generally taken out when the home needs repairs or if the owner wants to make an addition to the property, like a garage or a pool.

Home owners can also have liens on their properties. When you are sued, for example by a credit card company, for a sum of money and you lose the battle in court, the winning party can file a judgment lien, which will be attached to your property. This article will describe what happens to second mortgages and liens if your home goes into foreclosure.

What is a Second Mortgage and a Lien?

Second mortgages are pretty much just like any other mortgage loan, but they have some advantages and disadvantages of their own. Typically, borrowers will take out a second mortgage in the form of a home equity loan by tapping into home equity. This type of loan is actually a line of credit which is used much like a credit card. The borrower withdraws the amount that he or she needs, which will have to be paid back with interest. Home equity loans are usually used by home owners who wish to make repairs or improvements to their homes.

A lien is created and attached to your property when you lose a lawsuit that involves a sum of money. The property lien gives the creditor the right to repossess your assets in order to satisfy your debt. A judgment lien will prevent you from selling your property until it is removed.

The priority of a lien is determined by the date when it was recorded. Usually, first mortgages are considered first lien, second mortgages are considered second lien, and judgment liens come in third position.

What Happens After Foreclosure?

When a home is foreclosed on, it is important to know who gets paid first. Normally, first mortgages get paid off first after foreclosure. After the foreclosing lender receives his money, the remaining funds will be used to pay off second mortgages and any liens on the property. If the property doesn’t sell for more than what the mortgage loan is worth, then the foreclosing lender gets all the money, and any second mortgages or liens will be wiped out, but the debt won’t be eliminated.

A common mistake that many people make is thinking that second mortgages or liens are paid off once the property is foreclosed on, even if the selling price wasn’t high enough to satisfy these debts. After a foreclosure, the second mortgage and liens are removed from the property title, but the previous owner will still have to pay his or her debt.

The lender that granted you the second mortgage can sue you in order to try to recover his money. However, this will only happen if the debt wasn’t paid off after the foreclosure. Unfortunately, lenders for second mortgages usually don’t receive enough to satisfy your debt after foreclosure, so there is a strong chance that they will sue you. Liens have also been wiped out, but the creditor will still go after you in order to recover the money. Liens that were previously attached to the foreclosed property can still be attached to other real estate property that you own or will own in the future.

Having a second mortgage or lien can create problems even after foreclosure, if they are not paid off. So your best choice is to make sure that you protect yourself by doing some research beforehand, so you will know what to expect if your home is in danger of being foreclosed and you have a second mortgage and liens on it.

Zombie Titles: You Need to Know About These!

Zombie Titles-You Need to Know About These- 150x150Many Americans ended up having their homes foreclosed by lenders after the recent recession. Losing a home is a painful experience for the owners and an expensive one for lenders. That’s why sometimes lenders would send out a foreclosure notice, but don’t actually go through with the foreclosure. Normally, when home owners receive the foreclosure notice, they pack up and move out, thinking that the bank will take their home from them. This is not always the case, as sometimes banks don’t follow through with the foreclosure and the title ends up remaining in the name of the home owner who just abandoned his home, thinking the bank was going to take it as it happens in the foreclosure process.

Lenders are not legally required to foreclose on a property when the home owner defaults, and are also not obligated to notify the home owner that they have decided to dismiss the foreclosure, even after the foreclosure notice has been sent out. Lenders choose to sometimes dismiss foreclosures because of the high cost associated with a foreclosure or if they have a surplus of inventory.

You Own the Home Until It is Sold

Just because you choose to leave a home doesn’t mean that your name won’t be on the title anymore and you won’t be responsible for the home anymore. In this case, even if the lender sends out a foreclosure notice, you will still own the home until it is sold at a foreclosure auction by the bank.

Walking away from your home once you have been notified of the foreclosure is not enough to stop being the legal owner of the home. It is your responsibility to see the foreclosure process through, and make sure that your lender didn’t just dismiss the foreclosure and you left the home while still owning it.

A Zombie Title Can Be a Big Financial Burden

After receiving the foreclosure notice, you may have chosen to abandon the home, and move on. Foreclosure will negatively affect your credit score and ability to buy a new home, so renting will probably be your best option. But, if you haven’t made sure that the foreclosure process is finished, you might end up finding out that you still own a home. This can happen months after you thought that you have lost your home for good.

An unoccupied home can become a target for thieves and fall into disrepair. Besides still being responsible for paying taxes on your property, you will also be held liable by the municipality or local government for repairs and maintenance on the property. You will most likely have to pay penalties and fees for leaving the home to fall into disrepair and ruining the overall atmosphere of the neighborhood, even potentially facing legal action.

How Can You Protect Yourself Against Zombie Titles?

The easiest way to make sure that you don’t end up with a zombie title that can make your life even more difficult than a foreclosure would is to make sure that the foreclosure process is completed. Leaving your home once you receive the foreclosure notice is a bad idea. You can still live in the home until your lender sells it, while having the opportunity of making sure that your lender actually goes through with the foreclosure.

Foreclosure is hard on anyone, and it is followed by having to find a new home and years of working on repairing your credit score. But before you start to rebuild your credit and find a new place to live, you should make sure that your home is actually foreclosed on. Having a zombie title on your hands will only attract more financial losses and headaches. So start researching what the foreclosure process entails and avoid a messier situation than the one that you are in already.

Home Affordable Foreclosure Alternatives Program – What You Need to Know

Home-Affordable-Foreclosure-Alternatives-150x150Not being able to afford your mortgage anymore can be a stressful experience. Knowing that you will eventually have to abandon your home and move again is not pleasant, especially knowing a foreclosure will leave a large black spot on your credit report. Fortunately, the Home Affordable Foreclosure Alternatives (HAFA) program offers home owners who are facing imminent foreclosure two options, which can make this experience more bearable. HAFA helps home owners who are eligible by providing protection and money if they decide to do a short sale or Deed-in-Lieu of foreclosure.

The Home Affordable Foreclosure Alternatives program is designed to help borrowers and their lenders to work together to avoid foreclosure. Lenders, like home owners, want to avoid foreclosure, because it’s a long and expensive process. The alternatives to foreclosure that HAFA offers are much more attractive for both parties involved.

Benefits of Home Affordable Foreclosure Alternatives

The HAFA program gives home owners the chance to avoid foreclosure by performing a short sale, which means selling the home for less than you owe to your lender, or giving the home back to your lender, known as a Deed-in-Lieu of foreclosure. Here are the most important benefits that this program offers:

  • After completing a short sale through HAFA, you will be free from your mortgage debt, unlike when you perform a regular short sale. The difference between what you owe and what your home sold for will be waived.
  • After closing, the Home Affordable Foreclosure Alternatives program may offer you $3,000 in relocation assistance, if you are eligible.
  • You are entitled to free advice from a professional, such as a HUD-approved housing counselor or a licensed real estate agent.
  • Lenders work with you to determine a good short sale price and are required to let you try to sell your home through a short sale or accept a Deed-in-Lieu of foreclosure before foreclosing on your property.
  • When using the HAFA program, your credit score won’t take as big of a hit as it would if you did a conventional short sale.

HAFA Eligibility Requirements

The first step to qualifying for the Home Affordable Foreclosure Alternatives Program is to apply to HAMP, Home Affordable Modification Program. In order to qualify for the HAMP program, you will have to meet the following criteria:

  • The home must be your primary residence.
  • Your mortgage must have originated before January 1, 2009.
  • The mortgage loan amount must be less than $729,750.

If you don’t meet the qualification criteria for HAMP, then your best choice is finding a short sale agent to assist you. If you are eligible for HAMP, it doesn’t guarantee that you will qualify. However, if you want to do a short sale, then being eligible but not qualifying is good news. If you are eligible, but the Home Affordable Modification Program turns you down, then you can qualify for HAFA. You can also get accepted into HAMP, but stop making mortgage loan modification payments in order to be able to apply for HAFA.

You can find out if you qualify for the Home Affordable Foreclosure Alternatives program by simply speaking to your lender. Foreclosure is hard on your lender as well, so they will try to avoid it and give you other options. Fortunately, the government is also willing to help through programs like HAFA, which are designed to help you get through a difficult period of your life much easier.

Need Assistance with Mortgage Loan Modification? These Services Can Help!

Need Assistance with Mortgage Loan Modification- These Services Can Help- 150x150Owning a home is a common goal that people have during their lifetime. Unfortunately, during times of economic unrest, owning a home can turn into a nightmare if you are unable to pay your mortgage anymore. The prospect of losing your home is frightening, and it’s something that will affect you financially and emotionally for a long time. Besides having to give up your home, the whole process will have a big impact on your financial situation, making it extremely hard or even impossible for you to be able to qualify for a new mortgage in the near future.

If you find yourself in danger of losing your home, saving it from foreclosure should be your main objective, and one way you can do it is by getting your lender to agree to a mortgage loan modification. Time is of the essence here, so calling your lender as soon as you notice any signs of trouble will increase your chances of getting approved for a mortgage loan modification. Lenders are not obligated to agree to a loan modification, but they want to avoid foreclosure as much as you do, so it is important for you to make sure that a mortgage loan modification is the way for you to get back on your feet financially, or else it would just be a waste of time for both parties involved.

Do You Need Help With the Mortgage Loan Modification?

A mortgage loan modification will probably involve several long discussions with your lender, and many home owners may not have that much free time, so hiring someone to do it for them could be the right choice, in this case. The truth is that the borrower can do most, sometimes even all, of what the mortgage loan modification professional can do. The most important thing here is to pay your mortgage, so hiring someone to do something that you could do yourself, would just be a waste of money, which could be used to get you out of this situation quicker.

But some people just won’t have the spare time to deal with a mortgage loan modification, so hiring someone to do it instead makes more sense. Others may think that they don’t possess enough knowledge on the subject to deal with loan modification themselves, in which case it also makes more sense to seek help, whether it’s from a professional, a relative or a friend.

Who Can Help With a Mortgage Loan Modification?

If you think you can’t tackle pursuing a mortgage loan modification yourself, or you simply don’t have the time to deal with it, then the next logical step is to hire someone to help you with this process. One place where you can look for help is non-profit loan modification organizations. Non-profit organizations, such as the Association of Community Organizations for Reform Now (ACORN), GreenPath, National Urban League, United Way, or Catholic Charities have offices all over the United States and are qualified to work with you and assist you with the mortgage loan modification process.

Another popular option for those who can’t deal with a mortgage loan modification themselves is to hire an attorney. Attorneys who specialize in mortgage loan modifications can offer you the proper guidance and discuss with your lender on your behalf. Hiring a professional is the best way of ensuring that the process goes smoothly and that everything will be handled with the utmost care and professionalism. If hiring an attorney is too expensive for the borrower, then contacting a local counseling service could be the next best option.

A third option when seeking help with your mortgage loan modification is to hire a mortgage modification company. Many times, these types of companies will overcharge you, often upfront, and provide no guarantees for something that you could easily do on your own. You have to remember that obtaining a mortgage loan modification is in your best interest, so hiring someone to give you advice is recommended, but hiring a company to do everything will probably not produce the same results, and it will cost more.

Needing assistance with your mortgage loan modification is nothing to be ashamed about. You are, after all, trying to save your home, so any bit of help matters. But before you go out and spend money on the services of a mortgage loan modification company, try to do a little research and find out if you won’t be better off doing things yourself. Receiving help from an attorney or someone who has experience with loan modifications, especially if you don’t have enough time to do everything yourself, is also a great way of making sure that you won’t have to go through a foreclosure and lose your home.

5 Tips to Protect Your Mortgage from Default or Worse

5 Tips to Protect Your Mortgage from Default or Worse- 150x150Becoming a home owner is expensive and takes a lot of work, but most people don’t realize that, once you have bought a home, you will, most likely, have to work even harder to keep it. Owning a home is significantly different than renting and, while it brings a lot more satisfaction, it is also more expensive. The habits that allowed you to transition from renting to owning will have to be kept up if you want to avoid default and losing your home.

Many times, things that will be out of your control will happen, and you will be in danger of losing your home, but there are also plenty of things that you can do to avoid that. Giving up your home is a nightmare and downright depressing, and you will want to avoid that at all cost. The good news is that, even when you are in danger of losing your home, you have options. Following the tips listed in this article will save you from having to endure a painful mortgage default.

What is a Mortgage Default and What Does it Entail?

Mortgage default happens when a borrower is late on a monthly mortgage loan payment or is unable to make mortgage payments anymore. Other actions which break the mortgage agreement, such as not paying property taxes, may also lead to mortgage default. The default allows the lender to foreclose on the mortgage home, in which case the home owner will most likely lose the ownership.

Mortgage default normally happens after the borrower is 30 to 60 days late on his mortgage payments, or when the borrower fails to pay the property taxes within 30 days after he or she was notified by the lender and asked to remedy the situation. In order to better understand when default happens in your case, you should carefully examine your mortgage documents, because the rules will be different from one lender to another.

Tips to Protect Yourself from a Mortgage Default

Trouble with your mortgage can start with just one missed payment, but it’s usually all downhill from there. The best way to avoid this kind of trouble is to plan ahead. Mortgage payments are, most likely, your largest monthly bill, so recovering after one missed payment is really hard. Here are a few tips that will help you avoid being late or missing mortgage payments:

  1. Keep savings. Saving when you have to pay off a mortgage loan is very difficult, but it is not impossible. Examining your monthly budget and cutting out unnecessary expenses, such as going out to eat or impulsive spending, can go a long way when it comes to saving money. Having even a few thousands saved up can be a real blessing if you have trouble making a monthly mortgage payment.
  2. Make the monthly payments. Having a plan in place and making timely monthly mortgage payments is the easiest way of avoiding mortgage default, but that might not always be possible. If something unforeseen happens and you are not able to make that month’s payment, pay what you can and call your lender to explain the situation and discuss options. You would be amazed at what a simple phone call can do to help you avoid getting into more trouble with your lender.
  3. Talk to your lender as soon as you have a problem paying your mortgage. Don’t wait until the monthly payment is due, you receive a notice or, even worse, go into foreclosure. Call your lender as soon as you see signs of financial trouble, explain the situation, and work with them to find a solution. As long as you are able to recover, your lender will most likely present you with a few alternatives, which will save you from default. Default and foreclosure are complicated and expensive processes for your lender, as well, and he will prefer to have you get back on track with your mortgage, than spend more money getting you out of your home.
  4. Understand the process. It may take up to 6 months until you will actually have to leave your home, so that gives you plenty of time to examine your options and take action. Panicking is the worst thing you can do, so the best thing to do is to talk to a professional and try to work something out, so your home won’t have to go into foreclosure.
  5. Consider refinancing. By refinancing, you will be paying your remaining mortgage loan by taking out a new loan. Refinancing is a good way of avoiding mortgage default, but you can also end up with higher monthly payments, so do your homework before you consider this option. Mortgage refinancing can also be an expensive process, a fact which must be taken into consideration when comparing the amount that you have left on your original loan to the new loan.

Mortgage default and losing your home can best be avoided by planning ahead and saving some money. Unfortunately, that is not an option for many home owners, so following these steps and acting before it is too late can protect you and your family from the risk of default and ending up having to give up your home.

See How Easily Reinstatement Can Get You Back on Track with Your Mortgage

See How Easily Reinstatement Can Get You Back on Track with Your Mortgage- 150x150One way to get back on track and reverse the foreclosure process on your home is through mortgage reinstatement. Mortgage reinstatement gives borrowers a second chance to keep their home and restore their mortgage loan. Most people believe that when they default on their mortgage and the home goes into foreclosure, there is no option left. Lenders agree to a mortgage reinstatement easier than most borrowers assume, but it will require you to regain control over your financial situation.

Going Into Foreclosure

The housing market received a large hit from the recent economic recession, and millions of Americans have felt it. While the housing market is in recovery, the effects of the recession can still be felt today.

When you stop making mortgage payments or fall behind, the lender will charge you some penalty fees and issue a warning. If you still can’t pay your mortgage, the mortgage goes into default, and you risk losing your home. You will then receive another letter from your lender, which will explain what will happen to your home. The lender will ask you to pay the entire remaining mortgage balance immediately, or they will start the foreclosure process.

The lender files the required documents with your local court, which will rule in their favor if you don’t do anything to remediate the situation. When the court rules in the lender’s favor, your house will go into foreclosure and can be auctioned off and sold.

Reinstating Your Mortgage Loan

Losing your home to foreclosure is the worst case scenario, but fortunately there is something you can do. Regaining control over your budget and being able to get back on track will allow lenders to reinstate your mortgage loan. Foreclosures can take several months to complete, giving you time to work something out and regain the ability to make your mortgage payments.

Getting your home out of foreclosure is going to be expensive, and it all starts with you taking care of all the penalty fees that have been adding up since you stopped making your mortgage payments. Consulting your lender is very important, because your lender will be the most qualified person to tell you what you need to do in order to achieve reinstatement. Your lender will most likely avoid evicting you from your home and do whatever possible to keep you in your mortgage.

Your lender will have the power to modify your mortgage loan to fit your budget and even give you a lower interest rate, which will lead to a lower monthly payment. If you can prove to your lender that you can start making mortgage payments on time each month again, they will most likely work with you to reinstate your mortgage loan.

Reinstating your mortgage loan is an easy way to get you back on track with your mortgage and avoid losing your home, but it all depends on your ability to come up with a budget that will allow you to start paying your mortgage again. Losing a home is not easy and will most likely lead to a lot of stress, or even depression, but as you’ve read in this article, all is not lost when your home goes into foreclosure. Mortgage reinstatement is a viable option for those who are able to get their finances back on track.