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Guest Post: Managing your finances before homeownership to save your home from a foreclosure

Managing your finances before homeownership to save your home from a foreclosure

Are you planning to purchase a new home? If yes, you have to buck up your finances so that you don’t fall in trouble in the near future and then risk losing your home to a forced foreclosure. Managing your finances is the most important job that you have to do when you plan to take out a home mortgage loan from a bank. The mortgage loan entails your home as collateral so that when the borrower defaults to make the payments on time, the lender can foreclose the house and recuperate the money. How much house can I afford is the most important question a borrower should ask himself before taking the plunge. Here are some important steps that you should take in order to manage your finances once you plan to take out a home loan.

  • Stop all the unnecessary expenses: Whenever you contemplate buying a new house and forget paying further rent, you should stop making all the unnecessary expenses that you can do without. If you don’t read magazines, stop the monthly subscriptions to magazines. If you can cook well, stop dining out every weekend as this will save your dollars in the long run. You can even do without the cable connection at home. If you can build an emergency fund, you can easily take out a mortgage loan at an affordable rate.
  • Stop using your credit cards: Are you aware of the fact that the mortgage lender will check your DTI ratio or the debt-to-income ratio that is the ratio between the total monthly debt obligations with your monthly income. If you keep on purchasing things with your credit cards, you’ll drown in unsecured debt and thereby be forced to take out a home mortgage loan at an unaffordable interest rate. Therefore, stuff your wallet with cash so that you may stop buying things when you’re exhausted.
  • Save enough money: Yes, this is the ultimate secret that will take you to the path of a smooth mortgage loan approval. The mortgage loan underwriter will check the amount you’re paying down while taking out the loan amount. The more you pay down, the lower will be the rate offered to you. You should save enough money so that you can at least pay down 20% of the loan amount and avoid paying PMIs later on.
  • Keep track on your credit score: Don’t take any wrong step that can hit your credit score. Pull out a copy of your credit score time to time so that you know where you stand financially. Repair your credit as much as possible so as to grab the best mortgage loan at the most covetable cost.

When you’re dreaming of homeownership, make sure you follow the money tips mentioned above. By taking all the tips mentioned above, you can get the most appropriate loan in accordance with your affordability. Don’t forget to ask yourself “how much house can I afford” before taking out the loan.

Mortgage Modifications are a Mess

You have probably heard about the robo-signing fiasco and the fact that mortgage modifications are grinding to a standstill. We’re also seeing foreclosures occur after a modification has been approved–even occasionally when borrowers have the ability to make the payments. The whole process is a mess, and according to a top federal regulator, major U.S. banks are about to be penalized for “critical deficiencies” and shortcomings in their handlings of foreclosures.

One of the problems is that it is in loan servicers’ best interest to stall a foreclosure or modification.  This is because they can continue to charge fees while they’re servicing the loans. They charge fees for paying taxes, sending payments to the investors after receipt from borrower, maintaining records, etc.–and those “nickels and dimes” add up.

Having gone through the modification process firsthand, I can confirm that the process is daunting at best. The most painful part was when I had to pay 11% interest on my $400,000-first mortgage when the loan was adjusting at one point; only to have the bank tell me (on multiple occasions over a three-year period) that I either made too much money…or not enough. I went to court to stop a threatened foreclosure, but I still had to pay the ridiculous interest until my modification was approved.

While I won the victory of a modification, every situation is different. Like probably many of you, I’m still upside-down on the property, but at least I’ve lowered my payments while I await the market’s recovery.

In the interim, the Controller of the Currency and Federal Deposit Insurance Corp. has put sanctions on the banks, as I mentioned above, but the sanctions barely amount to a slap on the wrist. The reality is that the regulating agencies have a history of negatively impacting borrower’s rights rather than protecting them. So where does this leave you if you are fighting to keep your homes?

My personal experience has inspired me to grow my expertise in this area so that I can help others. No American should be subject to the whims of the system, and no American family should lose their home because of the negligent practices of a third party. If you need help fighting through the process, give me a call. I’ll stand by your side.

John A Silva
www.johnasilva.com
619-890-3648