Dear Michael: I have a fixed 30-year mortgage which I got about four years ago. Since that time my property value has dropped. What can an average guy like me do to lower his mortgage payments? I called my bank and they told me that as long as I make my payments I would be obligated to continue at the same rate. What advise can you give me to save me on my mortgage?
Answer: Current statistics from the California Association of Realtors indicate that 30 percent of homes in California are under water. The only way you could get loan modification is by showing that you cannot make your mortgage payments due to personal hardship. Loan modification is defined as a permanent change in one or more of the terms of a mortgagor’s loan which allows the loan to be reinstated, and results in a payment the mortgagor can afford. Truth be told, the individuals who are getting loan modification are the ones who should not have qualified purchasing a property when they did. This is one of the many reasons why so many people are upset with the way loan modifications and short sales have transcended. I know this may be unfair to you, but the sooner you accept this fact, the easier it will be for you to come to terms with your mortgage payments. There is plenty of blame to go around, but blaming will not solve our current crisis. Greed is what got us into this mess; let’s hope that reasoning and learning from the past gets us out of this mess.
Dear Michael: I owe $145,000 on a condo I purchased about four years ago in Las Vegas. The condo is now worth about $60,000. If I decide to sell it for $60,000, could I make an arrangement with the lender to pay the $85,000 balance for the next 25 yrs, or do I have to clear the debt mortgage before I sell it?
Answer: Typically, loans have a due on sale clause which means that this would become a short sale. However, if you are willing to continue to make the payments the bank may come to an agreement. It would require that you convert the debt to unsecured debt since you will no longer own the collateral (the condo). I suggest you call the bank and see if they are willing to accept your terms. You can call the customer support phone number on you most recent mortgage statement and ask them. If the answer is no, chances are with the extent of the loss on your condo, foreclosure will be your other option. Keep in mind that if the bank forecloses, your credit could be affected for the next seven years.
Dear Michael: I am currently being approved for an FHA loan. Will I have the option to put 10 percent down or do I have to stay with the 3.5 percent minimum down payment allowed?
Answer: An FHA loan is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA does not carry the loan. Rather, it insures loans made by private lenders. FHA loans are designed for low to moderate income borrowers who are unable to make a large down payment on a purchase. An FHA loan allows the borrower to borrow up to 96.5 percent of the value of the home. The 3.5 percent down payment requirement can come from a gift or a grant, which makes FHA loans popular but not exclusive to first-time buyers. There are no restrictions in adding a larger down payment, but given a 10 percent down payment you should check if you can qualify for a conventional loan. FHA loans tend to have a slightly higher APR then conventional loan. The first step in obtaining an FHA loan is to contact several lenders and/or mortgage brokers and ask them if they originate FHA loans. As each lender sets its own rates and terms, comparison shopping is important in this market. Those who have a good credit history demonstrated by a solid track record of timely payments will likely be eligible for a loan. Potential borrower’s whose credit history is marred by slow payments, poor financial judgment and delinquent accounts may not be good candidates for loan approval.
Dear Michael: What does “Cash for Keys” means on a foreclosed home?
Answer: Due to the fact that many people facing foreclosure are trashing homes upon eviction, lenders are authorizing real estate agent/companies to offer cash to owners for leaving the place presentable and intact. The amounts vary but can be up to $8,500 depending on the banks. Generally the Realtor will do a final inspection when the owner have vacated. Some of the guidelines include: no hole in the walls, no missing toilets, no ripped out ceiling fans, cabinets and appliances etc. Even minor damage creates a major headache for the lender as they are not setup to make repairs. They’re already losing a significant amount of money. Damage may also prevent someone else (a new buyer) from being able to get financing on the home due to lender and HUD guidelines. Presenting “cash for keys” is a good incentive for the previous owner to leave quietly and not trash the home.
Michael Kayem is a Realtor with Re/max /Execs serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or e-mail them to him at: homes@agentmichael.com