Jumbo loans, or large mortgages for lavish homes, are becoming harder to get as mortgage lending requirements are changing. Image from Wikimedia Commons.

The mortgage industry is going through a volatile period, and the product known as jumbo loans is about to become harder to come by. Jumbo loans are mortgages for large amounts, usually $700,000 or more, and fewer banks may wind up willing to lend them. Smaller mortgages may also get harder to approve.

Mortgage underwriting requirements changing dramatically

Freddie and Fannie play a huge role in the mortgage industry. When a bank wants to lend a mortgage, Fannie Mae and Freddie Mac often agree to purchase the loan from the bank and sell it to investors as a security. This increases the amount of available loan capital so banks can lend more. The mortgage houses are becoming far more discriminating, and the mortgage products called “jumbo loans” are on the way out. The amount that qualifies as a jumbo loan has been revised, according to Reuters, to $625,000 from $729,750. This means in October, Fannie and Freddie will no longer back loans of $625,000 or more. Home buyers who want jumbo loans are scrambling to get the mortgages approved before the loans can’t be underwritten anymore.

Mortgages for low income people to suffer as well

Banks are more willing to lend to people when Fannie and Freddie will purchase the loans. New lending requirements being proposed by the Federal Reserve may make it harder for low income buyers to get a mortgages. As a result of the Dodd Frank Act, the Federal Reserve has proposed that an “ability to repay” metric be established as a requirement to get a loan, according to MSNBC. Low income borrowers would be affected, as an already skittish mortgage market is not conducive to lending bad credit loans for housing. Lending mortgages to people who couldn’t pay them back, a criticism often leveled at credit card companies and payday loans lenders, has often been pointed to as one of the chief causes of the housing market crash. The Fed is only taking comments, according to the Wall Street Journal, and is handing over authority to the Consumer Financial Protection Bureau over mortgage lending practices when the agency begins operations in July.

Credit to tighten for housing

Many indicators point toward credit within the housing industry tightening significantly. Underwriting and purchasing requirements at Fannie and Freddie are already becoming far more strict. For a Freddie or Fannie affiliated lender to lend money for a condominium, 70 percent of the condo units in the building must already be sold, according to CNN. That requirement was 51 percent in 2009. The Federal Reserve and National Association of Realtors estimate that 25 percent of all mortgage application are currently denied, and fewer banks are willing to lend without federal backing from Fannie and Freddie.

Sources

Reuters

MSNBC

Wall Street Journal

CNN

Those who can qualify for financing can get low cost loans for homes. Image from Wikimedia Commons.

Interest rates on mortgages have fallen recently, meaning mortgages can be very low cost loans for people who can qualify for the financing. Rates for 30-year fixed, 15-year fixed and five-year adjustable mortgages are beginning to slip again after housing data indicates growth has stalled in real estate. A double dip housing recession may be possible.

Those who qualify could get a steal on a home

Currently, the market rates for home loans are starting to trend downward as demand is waning for housing. Buyers who qualify may be able to get some seriously low cost loans. The market rate for adjustable rate mortgages is hitting all time lows, as a five-year adjustable rate mortgage, or ARM, recently fell to 3.72 percent from 3.80 percent, according to MSNBC. That is up from February, when five-year ARMs hit a market rate of 3.23 percent. The average rate for a 30-year fixed mortgage hit 4.87 percent, more than the rate observed in November, when 30-year fixed mortgages hit a 40-year low of 4.17 percent. The going rate for 15-year fixed mortgages is currently 4.15 percent.

Double dip possible

A second recessionary period in housing could be on the horizon, according to CNN. That doesn’t mean a person will ever be able to purchase a home by taking out a couple of payday loans, but it won’t be pleasant to watch the real estate industry to slip even further into the abyss. Robert Schiller, co-founder of the Case-Shiller Index, says there is potential for the prices of homes “falling another 15, 20 or 25 percent.” Given that housing prices are near to the lowest levels since the great housing crash of 2008, a double dip in real estate seems plausible. If it were to happen, it could mean further bad news for an already shaky economy. Since states rely partially on property taxes, lower values mean lower revenues and that would lead to more states having serious budget woes.

The virtues of renting

Since the latest recession began in the housing market, it has called into question whether it is better to rent or buy. Buying a home can pay off, provided that a person buys when values are down and sells the home when values are up. It also helps to have paid off the mortgage or to have gained a good share of equity. However, renters pay no property taxes and have to do little, if any, maintenance. Granted, renting means having to part with more instant cash every month than a homeowner.

Sources

MSNBC

CNN

Getting an affordable mortgage doesn't have to involve good credit scores, high down payments and 30-year terms. Image: CC Keven Walter/Flickr

You don’t need a stellar credit score and a large down payment to buy a house. By gaining some knowledge about how mortgage lending works, you can make decisions and take actions that result in a good deal. Here are some basic guidelines on how to get the house you want at a price you can afford.

Credit scores and mortgage lenders

A good credit score of 700 or above isn’t necessary to buy a house, no matter how tight credit is these days. An average credit score of between 600 and 700 can qualify for a mortgage loan. The interest rate will be higher for an average credit score, but if mortgage lenders were just interested in good credit scores, business would be slow. You may not need a high down payment to get into a home either. The Federal Housing Administration backs first-time home buyer loans at 3.5 percent down. But to avoid the expensive private mortgage insurance required for loans with less than 20 percent down, you may need a second trust loan, or “piggyback loan” to augment your 3.5 percent down payment.

Get approved, then go house hunting

When it’s time to go house hunting, turn the tables on what most people do. Instead of finding the house you want and then trying to get a mortgage loan for it, get approved for a loan first. Then you will know what you can afford and avoid wasting time looking at houses that are outside your price range. By focusing on realistic expectations, you could find a gem that may have otherwise been overlooked. Plus, by starting out within your budget, future troubles that many face by getting stuck with mortgages they can’t afford can be avoided.

What type of mortgage loan is right for you?

When you set out to find approval for that mortgage loan, try not to be married to the idea of a 30-year home loan. Most people choose 30-year mortgages because monthly payments, spread out over three decades, are lower. But the interest paid is also spread out over those three decades. A 15-year home loan, with half the mortgage payments, will end up costing significantly less overall, and be over with twice as fast. And when it comes to debt reduction, keep in mind that a mortgage is some of the cheapest credit there is, and the mortgage interest is tax deductible. Pay off those credit cards first.

Sources

GoBanking Rates

Bankrate.com

Buzzle.com

The number of people underwater on bank loans for homes they bought is declining, but not fast enough. Image from Wikimedia Commons.

Fewer people are getting under water on the bank loans on their homes. Underwater is when a person ends up owing more to the mortgage company than the home is worth. However, part of it is thanks to the number of foreclosures.

Fewer bank loans are getting underwater

The number of people under water on their homes — owing more in bank loans than the home is worth — is diminishing, according to USA Today. Underwater mortgages have become a problem for a lot of American homeowners, who went out to get a loan for a home, only for the value to plummet. Recreational and retirement hot spots like Nevada, Arizona and Florida were hit  hard, with greater numbers of foreclosures and real estate values dropping through the floor.In some urban areas, such as Chicago, the rate of foreclosures has’t been as bad as in other cities, especially in metro areas that are still heavy industrial centers.

Foreclosures played a part

The decline in underwater mortgages has been slight, only 0.5 percent. A large portion of the reduction in people paying installment loans for more than a home is worth is likely due to the sheer number of homes that have been foreclosed, taking numerous mortgages off the books. There have been some incentives offered from the government, but talking loan lenders into reducing debt when many a loan company  is struggling is a tough sell.

Home values likely to stay down

It is likely that the housing market is not going to be at its best for some time. Record number of foreclosures, and fewer people confident enough to purchase a home or able to qualify for the financing  due to tougher restrictions on credit, will work against the housing industry’s favor. However, growth has been slowly taking place, and a slower recovery than desired has appeared to be the most likely scenario.

Sources

USA Today

Fewer people lost their homes to foreclosure in November as banks backed off to deal with the robo-signing controversy. Image: CC tombothetominator/Flickr

Foreclosures dropped in the U.S. at a record pace in November. But these days a positive housing market news item has a dark foreclosure shadow lurking behind it. Foreclosures dropped because of robo-signing moratoriums, similar to a recent drop in underwater mortgages due to increasing foreclosures.

What the foreclosure drop means

Foreclosure notices in the U.S. fell 21 percent in November. According to RealtyTrac, an online clearinghouse for foreclosed properties, the month-to-month decline was the steepest ever recorded since the company began tracking foreclosure statistics in 2005. The number of homeowners cast out on the street after bank repossessions dropped even more — 28 percent from October. In a press release, RealtyTrack said foreclosures dipped below 300,000 a month for the first time since February 2009. A seasonal foreclosure drop is typical in November, but a delay in foreclosures in response to the robo-signing controversy is the main reason for the decline, which is expected to be temporary.

The robo-signing effect

Last fall the robo-signing controversy erupted when an employee at Ally Financial admitted in court to not reading foreclosure documents before he signed them. Robo-signing exposed negligent processing of foreclosure documents in a mortgage industry overwhelmed by the sheer number of foreclosures. Banks operating in states where courts are involved in foreclosure proceedings took a time out to clean up their acts. Most borrowers in foreclosure have gotten a temporary reprieve from repossession and eviction. Meanwhile, the unemployment rate rose, U.S. home values continued to fall, and banks are gearing up their foreclosure machines once again.

Foreclosures and housing values

Last week a drop in underwater mortgages recorded in the third quarter was credited to a surge in foreclosures, rather than an appreciation in U.S. home values. A foreclosure takes an underwater mortgage off the books. But some are still willing to search for a bright side. An analyst told MarketWatch that the November drop in foreclosures, albeit artificial, could help existing home sales in December and January. A reduction in inventory could start an upward trend in home prices that could result in a reduction of underwater mortgages that isn’t illusory.

Sources

CNNMoney.com

MarketWatch

Mortgageorb

These are the repossessed homes that banks no longer want to sit on. Banks are more than willing to work with you in any way possible to sell off the home. It’s smart business, if you ask me, and it is all to your advantage if you don’t have a home of your own.

Banks, mortgage lenders and Realtors

The best part about it is that it doesn’t cost anything to look into this amazing opportunity. Why not shop around? With interest rates as low as 4.25 percent, you just might score an amazing deal. It can be fun, too, rather than an emotional, upsetting adventure. There are plenty of horror stories out there about banks not performing well and Realtors who are only hungry for their commissions. However, all banks, mortgage lenders and Realtors are not created equal. You won’t find the good ones if you believe they are all bad.

Finding the right people

To find the right personal loan mortgage lender, ask around and don’t believe everything negative someone tells you. My friend (the Realtor) found a guy who can almost always get a loan done in a very short period of time. Now, is that because he is cheating or dishonest? Not at all. He just knows his business and only gets paid if he processes an approved loan. On the other hand, those working at banks may be paid on salary and won’t really care how long it takes to get you approved. Ask, and keep asking until you find that one lender that’s fast, efficient and professional.

It is to your advantage

It might take you a little while to find the right people; stay calm and be patient. What happens, typically, is we get excited about buying a house and jump on the first available opportunity, then get dragged through the mud, only to swear we won’t do it again. Just take the time to find the right lender. Make it an adventure and remember, you can always apply for a payday loan or a cash advance loan to help you along the process.

In the world of mortgages there is a lot to learn. If you are a first time home buyer and are in need of a loan, do some research to find out what types of loan products are out there for you. There are pros and cons to each type and there is no one loan that fits everyone. Use the help of a mortgage broker to find out which one is right for your lifestyle.

Thirty-year fixed-rate mortgage loan

These are the loans the mortgage lending business is built on. If your parents had a mortgage, this most likely is the one they used. It’s the most straightforward of loan products because nothing changes throughout the duration of the loan. It is set for 30 years at one specific rate. You can view your amortization schedule and see how the loan plays itself out in terms of interest and principal over the years. This is the safest of options because of its reliability.

Fifteen- or 20-year adjustable-rate mortgage loan

These loans offer a way for borrowers to pay off their loans before retirement. They give you the chance to refinance after either 15 or 20 years. In general, these loans have higher interest rates than a 30-year fixed rate loan, but that ARM could also be considerably cheaper. If you have expendable income to put into possible payment hikes, you could end up saving money with these types of loans.

One-year adjustable-rate mortgage loan

This is a great loan for college graduates who see a bright financial future regarding their earnings. They offer a low interest rate for the first year and then after that, the interest rate increases. There is an interest rate cap on the loans and the rate can go up or down every year after the first. The one caution here is to know that there is a difference between a “rate cap” and a “payment cap.” The rate cap is what you want. It sets a ceiling on how high your interest can go. On the other hand a payment cap only means that your payments can’t go higher, but your interest can still continue to rise.

Interest-only mortgage loan

The interest-only mortgage may sound great, but it’s only for a few borrowers. This can be a great product for someone relocating for a job because it only charges interest. That can make the payment considerably lower. Don’t be fooled,however: This isn’t for the average borrower. Worst case, the wrong person gets this loan and ends up paying only interest for years on their loan. When they go to sell, they may owe more and have to take money out of savings to pay back the full mortgage amount.

No- or low-documentation mortgage loan

The self-employed oftentimes have trouble finding the right loan product. The types of loans for the self-employed are called no- or low-documentation loans. They automatically come with higher interest rates due to not having to produce paychecks or references. They can help people with variable incomes qualify for loans easily. One warning however is that normally this type of loan requires substantial down payments of about 20% or more.

The mortgage-lending market

The lending market is flexible in that there is a wide variety of loan products to choose from. These are the main ones and the most popular, but there are many others. Talk to a good mortgage broker and let them suggest what mortgage products are right for you.

With the world economy firmly entrenched in a reset mode, loans of all types are becoming more difficult to obtain. That is not to say that it is impossible. The fact of the matter is, financial institutions, banks, and credit unions will always make loans. It is the lifeblood of the financial industry.

The business part

With a record number of foreclosures, the inventory of available homes is large. That makes the market very saturated with homes that are in the hands of the home buyers. Therefore, banks will need to make home loans. The process for securing home loans may indeed be more difficult, but home loans are still very much available. Potential home buyers have many choices on where to secure home loans.

Changes made, documents are now a priority

One of the first differences home buyers will notice when trying to secure a new home loan is that the need for accurate documentation is now a priority. In the past, consumers could literally loan with no down payment, no documentation to prove income, and a substandard credit score. Essentially, with a signature a home buyer could secure a new home loan.

Today’s requirements

Those days are past. Today, lenders are requiring borrowers to provide accurate documentation to support a new home loan. That means being prepared as you begin your search for new lender.

More documents are needed

Gather all your financial statements and documents. Make sure that you pull a recent credit report on yourself. If you have pristine credit, securing a new home loan will not be an issue. However, if your credit score is below 650, it’s likely you will have to provide documentation to answer why your credit score is lower. This does not preclude you from a new loan, it just means providing more documentation.

This may mean having to provide explanation letters to prospective lenders about why your credit score or credit report shows a negative. Provided that you have overcome the issues that produced a negative score, and can provide documentation to that effect, lenders may be willing to provide a home loan for you.

The competition between lenders

It’s likely that you are bombarded with lenders advertisements trying to entice you into using their company. This can work to your advantage. Here is how. Make sure that any lender you communicate with understands that you are shopping on your own among several lenders. There is nothing like the thought of competition for a prospective lender to work harder for you. This may result in a lower interest rate, or other financial benefits. The point is to shop one lender against the other for your benefit. Lenders need borrowers as much as borrowers need lenders.

Once upon a time, your home’s equity was the equivalent of an ATM machine. You could walk into any bank and apply to borrow money against the equity of your home. Banks were also flashy in their advertisements, asking people to borrow on their home equity for any reason under the sun. Now it seems that the home equity ATM has switched itself off as though some virus attacked it. The loans to buy the flashy cars, TVs and home improvements are no longer available, and many people cannot just borrow for any purpose anymore. Have these loans suddenly been stopped? No, banks are just more choosy about who they lend to.

Reason to Hold Back

At the height of the real estate bubble, banks were flush with funds and wanted to entice people into taking out further loans on the equity they held against their homes. Flashy advertisements offering second mortgages to people gave a number of reasons why more loans should be taken out, including home improvements, education, and purchase of luxury goods to make their point. Consumers were also happy to take out the loans, because they could live the good life without too much difficulty. Things changed when the real estate market slumped and the recession became evident, as property prices and incomes plummeted, leading to defaults on mortgages. People who had borrowed money as a second mortgage began seeing many difficulties with their finances, as they now had to deal with two payments instead of one. Household incomes started dipping as well, and banks finally decided to pull the plug when unemployment started increasing along with defaults on mortgages.

No More ATMs

With falling prices of properties, people found that the value of their homes had declined as well. While they had already borrowed the money they wanted, they found themselves unable to repay these loans when they came due. Many people got a renegotiated settlement plan from their banks, while others were not so lucky. The people who took out home equity loans are now having to pay back two loans in a time when their incomes have decreased, making their future outlook bleak and discouraging. What happened to the ATM from their home’s equity? It’s completely gone, along with their futures.

High Risks to Lenders

People who borrowed money on their home equity do not realize that these lenders are at risk of losing their entire investment in the case of a foreclosure. Yes, they probably paid higher fees to get the money and may also have kept up their part of the bargain. However, in the event of a foreclosure, it is the primary lender who has the first dibs on any proceeds received from the sale of the property. Under these circumstances, it is natural for the lenders to put the brakes on such loans. Where does that leave the consumer?

As things stand at the moment, it certainly looks like the borrower is left in a difficult cash crunch. They will need to talk to different people, and come up with a suitable action plan to sort out the mess that they have gotten themselves into. Returning the borrowed money is after all the primary objective, in comparison to losing the home.

There’s never been a better time to buy a home than right now – real estate prices are at an all-time low and the government has sweetened the deal with new incentives for first-time homebuyers. But before you start attending open houses and planning how you’ll arrange the furniture in your new living room, you need to take the first step in the home-buying process: getting pre-approved for a mortgage.

So why bother to get pre-approved? Shouldn’t you find the house you want to buy first? Mortgage pre-approval has a number of benefits. First, the pre-approval process may uncover errors on your credit report that you hadn’t noticed before, errors that may be hindering your ability to qualify for credit. In addition, mortgage pre-approval will show you exactly how much house you can afford, so that you don’t fall in love with a home and then find yourself unable to get a mortgage.

Choosing a lender

Your lender will be your ally throughout the process of purchasing a home, so it’s important to choose the banker and the lending institution that are right for you. Typically, most people start with their own banks or credit unions, although there are plenty of other options out there. If you aren’t able to get the best loan terms at your own bank, a private mortgage lender may be able to help. These companies exist for the sole purpose of making mortgage loans, so they often have access to more specialized lending programs that you may qualify for.

Meeting with the lender

When you call to schedule a meeting with your chosen lender, the office will let you know what kind of documentation you’ll need to bring in. Depending on the lender’s requirements, you may need to bring in pay stubs, tax returns, and other evidence of income such as child support or investment returns. In addition to the documentation you provide, your lender will obtain a copy of your credit report. In most cases, the meeting will conclude with the lender giving you an estimate of how much mortgage debt you qualify for.

Taking the next steps

If you’re satisfied with the mortgage amount your lender prequalifies you for, your next step is to start looking at houses. Your realtor will use your pre-approval to identify houses that you can afford and as a negotiating tool with sellers and listing agents.

If, on the other hand, you feel that you should qualify for a larger mortgage, ask the lender what you can do to improve your financial position. It could be that your low credit score is holding you back from getting a mortgage in the amount you want. If this is the case, paying down the balances on some of your credit cards could improve your score enough that you qualify for a larger mortgage. Or, if the credit report your lender obtains has errors, you may want to get them corrected before proceeding with your search for a home.

HELOC stands for Home Equity Line of Credit. It’s a credit line offered by a bank with the borrower’s property equity serving as collateral for the loan. The equity is the difference between the market value of the property and the amount still owed on mortgages or other encumbrances.

For example, if you owe $70,000 on your house and the market value is $250,000, your equity value is $180,000. On the basis of this equity the lender is normally willing to offer a HELOC that the borrower can draw against for five to ten years, with a repayment period of up to twenty-five years.

Should HELOC be considered a type of credit card or a loan?

A HELOC is essentially a hybrid between a credit card and a second. Like a credit card, the lender allows you to spend up to a certain limit (i.e., the amount of the equity) and you only have to pay according to the amount of credit used. Each time credit is taken up the amount of credit available declines, but it increases again with repayments. However, unlike a credit card the HELOC is a secured debt.
The pledging of real estate as security makes a HELOC similar to a second mortgage, but there is a key difference. When a second mortgage is obtained, the lender gives the borrower the entire loan amount in a lump sum, but with a HELOC the loan is taken out on an installment basis according to the borrower’s needs.

What are the advantages of a HELOC compared to other kinds of loans?

The chief advantage of a HELOC is its suitability for infrequent but major expenses in a household budget. Common examples include financing a home addition, and paying for a child’s college tuition or wedding expenses. With the current, low prime interest rates HELOCs can provide inexpensive financing. Another significant advantage is the fact that borrowers may quality for tax deductions on HELOC repayments.
For some borrowers, the HELOC can provide an economical means of debt consolidation. You might find it significantly cheaper to pay the interest on the HELOC rather than to continue paying several lenders their interest charges, administrative costs and delayed payment penalties.

Disadvantages of taking out a HELOC

The attractiveness of taking out a HELOC in certain circumstances needs to be balanced against the risks. If the HELOC carries a variable interest rate, Borrowers should be aware that interest rates can change to their disadvantage. Furthermore, if they fail to make repayments, they may ultimately lose their homes.

If you decide to use a HELOC to consolidate debts, remember that it is common for banks to charge closing fees for paying off their loans and this expense should be taken into account when calculating your expected savings. With some HELOCs personal liability for any deficiency remains even after the bank has foreclosed on the secured home. Another risk is that banks have the right to terminate an unused credit line if a decline in property value reduces the borrower’s equity.

Stop playing tug-of-war with your credit card company.

You are overwhelmed with debt. You have eight credit cards that are all maxed out. Making the minimum payments is causing much financial stress, and you are not making any headway on getting out of debt. What can you do? Get help, get debt counseling, find someone who can help you with the necessary information to manage your debt.

Today, many people feel that securing a debt consolidation loan is the best option. A debt consolidation loan is a single loan, which pays off other loans and specific lines of credit. It’s likely that you have seen advertisements, and the claims that are made by these firms seem to have a measure of validity. Are debt consolidation loans a good idea for you? Let’s take a look and see if a debt consolidation loan is right for you.

Debt consolidation can decrease stress

A major benefit of a debt consolidation loan is that you are obligated to make one payment instead of many. For people who mismanage their bills, this can be a great stress reliever. Obviously, managing your bills with one payment makes managing your finances much easier.

Save money with lower interest

Secondly, most debt consolidation loans will provide the borrower with reduced interest rates. The most common type of debt consolidation loan is generally a home equity loan or second mortgage. Because a mortgage or home equity loan is a secured debt, the interest rates will be significantly lower.

With a secured loan comes the added benefit of a lower monthly payment. This perhaps is the best benefit to securing a consolidation loan. If you are like most families, you have a certain amount of money every month. That money is distributed to various creditors and expenses. If the total sum of that money is lower, obviously you will realize the benefit.

Simplify your financial situation

The benefit of having one creditor means that if you do suffer financial difficulties you will deal with one creditor instead of numerous phone calls from a number of different creditors. If you have ever experienced creditor phone calls you most certainly will count this as a benefit.

If your debt consolidation loan is a home-equity loan, you will also get a tax break each year. While credit card interest rates are not typically deductible, the full interest amount is deductible on home-equity loans. Subsequently this is an added benefit for you.

Don’t be too hasty

The negatives to consolidation loans are that it is easier for you to get back into debt. With more money left over at the end of the month the your credit cards all freed up, you may end up in the same spot you were when you took out your debt consolidation loan.

The most obvious negative to a consolidation loan that is secured with a home is you run the risk of losing that home. Because your consolidation loan is backed by your house, failure to make payments in a timely fashion could result in foreclosure.

Times should be a-changin’

Consolidation loans serve as a remedy for many people to relieve financial difficulty. For others, it may lead them to more financial difficulty. Consolidation loans are not for everyone, and everyone should evaluate their situation and know their level of fiscal responsibility.

The bottom line is, if you have mismanaged your finances in the past, you are at risk to do so again unless you make some significant changes. Weigh your options carefully, and plan accordingly.

Click For More Information on Debt Consolidation

A hard money loan may be the key to avoiding foreclosure

The residential foreclosure rate continues to rise. Because of the lenient lending policies that were so popular during the housing bubble, many home owners now find themselves in situations they never thought possible.

Following recent losses, banks have created new credit policies that make it difficult for home owners to refinance their properties. Sub-prime borrowers are finding it impossible to get the money needed to avoid foreclosure. Fortunately, private lenders have seized the opportunity to help people avoid foreclosure by providing hard money loans.

An alternative to foreclosure

Times have changed and a hard money loan may be the only alternative to a mortgage foreclosure. Hard money loans still carry interest rates that are higher than those of most banks and traditional lending institutions, but now lenders are willing to tailor agreements in accordance with the best interests of all parties involved. Used properly, a hard money loan can allow you to make the corrections you need in order to save your home from foreclosure.

The “loan shark” reputation

Lenders offering hard money loans have been referred to as loan sharks in the past, because they had a reputation of being tough and ruthless in their application of the terms of the agreement. They charged high interest rates and did not hesitate to seize properties when a borrower defaulted on the repayments.

How to make your hard money loan a success

There are many hard money lenders in the market, all offering different terms and conditions. It is in your best interest that you thoroughly research these lenders before making a decision to borrow, and discuss your situation with people who may have valuable input. Before you choose a lender, do the following:

Make an appointment with several lenders before you make a choice, so that you can see if their terms and conditions are right for your situation.

Remember that these loans are negotiable, so be prepared to bargain.

Every dollar you save is extremely valuable, so do not borrow more than what you need.

Hard money loans have relatively high interest rates. You could be headed for more trouble if you can’t make the payments, so make a plan right now to pay off your loan as quickly as possible.

If you have access to an accountant or a real estate attorney, do not hesitate to use their services, as they may be in a position to put you in touch with a reliable lender from their list of contacts.

Be prepared to give your true financial status to the loan officer. Honesty can make the difference between getting a tough deal and a favorable one, because even the best-intentioned lenders want to minimize their risks.

Is foreclosure really an acceptable option?

A hard money loans is a great way to get the extra time you need to avoid a foreclosure. The real estate market is slow and traditional lenders are tightening up on credit policies. The best way to save your home in this economic climate may be to get a hard money loan. What have you got to lose? Hopefully, not the house.