The Slowdown 6: Avoiding Home Purchase Delays

No one wants to have a long, drawn-out home buying process. But if you’re the kind of person who sees every month spent not in a new home as weeks of equity lost, you’re even more motivated to finish the purchase in a timely manner. While it’s not a great idea to rush into a new house, there are steps you can take to make the journey as efficient as possible.

The roadblock: Not having a real estate agent
While some may advise you to forego a real estate professional in an attempt to save money, doing so may cost you both money AND time. An agent who is experienced in working with local laws and procedures can help you get those keys in hand much faster.

The roadblock: Lack of preapproval
It’s important to understand the difference between preapproval and prequalification. Preapproval is a more thorough examination of your readiness to buy a home than prequalification and as such, puts you much closer to finalizing a home purchase. Begin the discussion with your lender ASAP to find out what you will need to get preapproved.

The roadblock: Insufficient information
When buying a home, it’s vital to know when to slow down and when to hurry up. Slow down when you’re filling out information for your lender. You don’t want missing or unclear information to bog down the flow of paperwork.

Hurry up when you are asked to provide information to your agent, lender or other involved party during the process. If you want to close as quickly as possible on your new home, you need to prioritize supplying answers immediately.

The roadblock: Low appraisal
If your prospective home appraises for less than the sale price, your lender can pull the plug on the deal. Start the appraisal process as early as possible to avoid delays later. Set up the appraisal through your lender and plan on it taking 14 days.

The roadblock: Poor home condition
You may be fine with a fixer-upper, but if your lender has issues after the home inspection, repairs may be required before you can close. If quickness of closing is important to you, focus on homes in a well-maintained state. You may not be able to sniff out all potential problems in your initial walkthrough, but steer clear of the obvious TLC-needing homes. You can also seek out sellers who have a presale inspection report.

The roadblock: Altering finances
Even if you’re preapproved, that doesn’t mean you’re guaranteed a loan. Lenders give a preapproval based on a snapshot of your financial details at that particular time. So if you suddenly decide to leave your job or buy that $2,000 pool table for your new home, you could change your money profile in the eyes of the lender. Do your best to keep your finances static in the run-up to closing.

Speed should never be your primary concern in finding the right home or finishing the deal. After all, you don’t want to rush through the steps and end up making a big mistake. Your best option for having a smooth and timely home buying experience is to make the extra effort to educate yourself early in the process.

Getting Your Name Off the Mortgage After Divorce

Your divorce has been finalized. You’ve moved into separate places, set up individual bank accounts and otherwise taken every step you can think of to create distinct financial lives. There’s just the matter of that pesky mortgage with your name still on it – despite the fact that you no longer live in the home!

If this is your situation, you may find yourself very motivated to not have your credit standing or financial obligations tethered to the vagaries of your ex’s payment record. If that’s the case, pay special attention to these options for removing your name from the mortgage.

Refinance
The reason lenders don’t want to make it easy to just “delete” your name from the mortgage records is because the loan was originally made under the assumption that multiple people would be responsible for payment. If you were to remove yourself from the picture, that fundamentally changes the risk assessment for the loan. For this reason, a lender wants the opportunity to re-evaluate the loan if there is only going to be one person on it – or a new person. If your ex-spouse has enough household income to maintain mortgage payments and has a strong enough equity position, a refinance to take your name off the loan could be an option.

Assumed loan
It isn’t terribly common, but in some circumstances, one spouse may be able to “assume” – or take over – the loan after a divorce. Don’t hold your breath, but it’s at least worth contacting your lender about.

Sell the home
If other methods fail, you can always try to talk your ex into selling the property. Given the financial turbulence that unfortunately tends to accompany divorce, your former spouse may be inclined to unload the property anyway.

Pay off the mortgage
If you’re concerned about the potential for missed mortgage payments to damage your credit, understand that if the mortgage is paid off, these concerns evaporate. If this is an option for you, consider the value of spending a chunk of money now to have a lot less worry in the future.

Dispute with the credit bureaus
As a final step, always pull your credit reports one month after your name was taken off the mortgage. Even though the lender may have removed you, this doesn’t always translate into your credit file being updated immediately.

If you still see the mortgage listed as an open account on your credit reports, dispute this item with the credit bureau reporting the data – Equifax, Experian or TransUnion. Slap a “.com” on the end of each of those names to reach their website and begin the dispute process. An online dispute should take care of the problem, but also keep handy any paperwork related to your name being removed from the mortgage just in case you need to file a paper dispute with the credit bureaus via mail later on.

While in the first few months after a divorce the mortgage ownership status can be a huge headache, normally with time and persistence the issue is resolved. It can certainly be difficult to communicate with your ex during this period, but working together to resolve the mortgage issue sooner rather than later will give you one less thing to worry about.

How to Rent Like You’re Going to Own

If you’re currently renting an apartment but would like to own a home someday, you’ve probably started to think about what it will take to get the keys to that house. As a renter, you should know that there are a number of ways you can use your time paying for your lessor’s mortgage as a springboard toward getting your own.

Live below your square footage means
Bottom line: splurging on a big apartment with all the extras can feel satisfying, but it can also take money away from your home-buying goal if it comes with a bigger price tag. Consider downsizing your current living situation to get into a house more quickly.

Don’t accumulate aggressively
If you’re earning a comfortable income, you may also be experiencing a desire to feather your nest a bit. Not only will a larger pile of possessions cost more to move into a home, but it can also lead you to buy more house than you need just to fit it all in. Getting in the habit of creating a comfortable and pleasant home without a lot of clutter will help you save and also make for a thriftier transition.

Goal reminders
Your apartment doesn’t have to be just the place where you store your stuff and sleep at night. It can also serve as a way to keep you focused on your home-purchasing goal. Keep pictures of the type of home you are interested in taped to your laptop or fridge. Keep a saving chart displayed prominently inside a cabinet or your wallet. By having these reminders around, you can maintain your focus even when saving isn’t at the forefront of your mind.

Get utilities smart
Consider renting as a trial run for mastering the delicate art of efficient use of utilities. By brainstorming ways to save on water, electricity, heat, etc., you establish positive habits that will serve you well when you make the big move into a home of your own.

Be lease careful
In your drive to improve your credit, don’t forget about the potential impact to your credit of breaking a lease. Like individual rent payments, breaking a lease isn’t going to show up on credit reports in most cases. However, if the person or company leasing you the apartment takes legal action against you to recover the deficiency amount you owed on the rental agreement, this could result in an ugly judgment showing up on and damaging your credit reports.

Pay your mortgage now
If you haven’t done so already, now is the time to sit down with pencil and paper – or laptop and spreadsheet – to figure out what you can truly afford for a future mortgage payment. While there are different ways to arrive at this number, a rough estimate in many cases is to figure that your mortgage payment should be no more than 35% of your monthly pre-tax income. If this 35% figure is more than your current rent payments, make a commitment to start depositing the difference into a savings account each month. This way, you train yourself to adjust to this new monthly obligation while also beefing up your down payment, closing fee or maintenance fund.

Renting an apartment doesn’t have to feel like serving out a sentence while waiting to get to the home you really want. Instead, think of it as a way to prepare yourself for dominating the process of getting into that home.

Post-Foreclosure Financial Action Plan

If your home has been foreclosed and you’ve moved out, you may have feelings of shame and hopelessness. But you should know that there are steps you can take to start bolstering your financial life.

• Secure housing, perhaps with an apartment lease or through an arrangement with a loved one.
• If you are not able to find housing on your own, dial 211 or 311 for a list of local organizations that can help. You can also call the Department of Housing and Urban Development at 800.225.5342.
• If your job requires a security clearance, talk with your superior about the impact of foreclosure to your credit.
• Complete a new budget and consider consulting with a financial counselor.
• Consult with tax and legal professionals to understand the potential impact of a deficiency balance. Call 877.777.4778 to see if you qualify for free help from IRS Taxpayer Advocate Service. Visit lawhelp.org for free or low-cost legal assistance in your area.
• Take a comprehensive look at your non-housing debts and develop a plan for paying them.
• Get copies of your credit reports by calling 877.322.8228 or by visiting annualcreditreport.com.
• Learn how to rebuild your credit and put a plan in place to do so.
• Save aggressively to give yourself housing security going forward.
• Don’t neglect the emotional impact of the foreclosure to you or your family. Find someone you can talk to about the turbulent transition.
• If children are involved, try to keep as much “normalcy” in their lives as possible and keep the lines of communication open.

After going through the trauma of a foreclosure, you may feel a strong desire to stick your head in the sand and spend as little time as possible thinking about money issues. However, by making a commitment now to rebuilding your financial life, you can help create a rosier outlook.

Don’t Peak! Avoiding High Energy Rates

When winter rolls around, your thoughts may turn to curling up with a warm drink and some nice reading material. May we suggest settling in to take a nice long gander at your utility bills?

Don’t scoff. Getting into a little more detail with your heating and electricity charges could be one of the most pleasant activities you engage in this winter. Don’t believe it? If you are currently being charged for peak time energy usage, take a look at that section of your bills. With peak rates in some cases five times as high as non-peak charges, you have now identified a target for potentially huge savings. Now that’s fun to think about!

Find the time
If they aren’t listed on your bills, contact your utilities provider(s) to confirm the days and times when they charge the highest rates for service. In the beginning it can help to post a list of these times on your refrigerator or other commonly-seen appliance as a reminder.

Be food smart
Consistently using an oven to cook meals during the high rate times can send your utility bills skyrocketing. But with peak periods often running until 9pm, you may balk at the idea of waiting until the late evening to cook a meal. Keep in mind that a microwave uses much less energy than a stove. Cooking meals late at night and then heating them up in the microwave the next evening can save you a bundle over time.

Wash wisely
If your preferred time to wash dishes or clothes falls during a peak rate period, it can be helpful to give yourself a little reminder to find a better time. Set an alarm or reminder to go off on your laptop or mobile device when peak hour rates end. That way you can do these high-consumption tasks at the appropriate hour.

Read a book
We’re not going to suggest that your energy bill is the only thing you read this winter. By snuggling up under the covers with a book and a nicely-illuminating candle, you can become an energy-saving triple threat. You don’t need to keep the temperature as high on your thermostat, you aren’t sucking up energy through the TV or other entertainment devices, and you don’t need to have any lights on. It’s a win-win-win situation.

By making a few small adjustments to your schedule, you can save hundreds of dollars per year without depriving yourself of anything.

The National Mortgage Settlement – What It Means To You

On February 8^th, 2012 the federal government announced that 49 states had reached a $26 billion settlement with five of the nation’s biggest banks to provide relief for current and former homeowners hurt by the banks’ practices and to try to ensure that these practices do not continue.

In the long-term this should mean more fair standards in mortgage lending, but what does it mean for you in the here and now? Find out below.

Do I qualify?

Answer these questions to find out:

1.  Did you formerly or do you currently have a mortgage serviced by one of the major servicers involved in the settlement – Bank of America, Wells Fargo, JP Morgan Chase, Citibank and Ally Financial (formerly GMAC)?

• Other servicers may be added to the list. To check if your servicer has been added, visit the National Mortgage Settlement’s website.
• If you are not sure who your servicer is or was, you can look it up using the Mortgage Electronic Registration System database.

If you answered yes, that your mortgage is serviced by one of the servicers listed above, continue to question 2.

If you answered no, you are not eligible for this particular program at this time.

2.  Does your mortgage situation fit one of these three descriptions?

• I am late on my mortgage payments or at risk of becoming late, am “underwater” (owe more than the property is worth) on the mortgage, and will need a loan modification (a change to the terms of the loan to make it more affordable) to stay in my home.
• I am current on my mortgage payments, but am underwater.
• My home was foreclosed on between January 1, 2008 and December 31, 2011.

If you answered yes to any of these, continue to question 3.

If you answered no, you are not eligible for this particular program.

 3.  Do you live in Oklahoma?

If you answered yes, you will need to contact the Oklahoma Attorney General Office as that state reached a separate settlement and is not included in the national settlement.

If you answered no, you may be eligible for relief from this settlement. Contact your mortgage servicer as soon as possible. 

I think I might qualify. What do I do next?

If you are eligible to receive assistance, the settlement requires that the participating mortgage servicers contact you via mail within the next nine months. However, it is always a good practice to stay in touch with your mortgage servicer, so contact them directly if you think you might be eligible. You can reach the servicers at:

• Ally/GMAC: 800-766-4622
• Bank of America: 877-488-7814 (Available M-F 7am – 9pm CST and Saturdays 8am – 5pm CST
• Citi: 866-272-4749
• JPMorgan Chase: 866-372-6901
• Wells Fargo: 800-288-3212 (Available M-F 7am – 7pm CST)

If I qualify, what can I expect to get from the settlement?

If you need a loan modification to stay in the home:

You may be able to get a reduction in the loan principal or other modifications to the loan. This would apply to both first and second mortgage liens. Principal reductions and other modifications can be combined. These modifications will not be used to create positive equity in the home, but rather to decrease the amount by which you are underwater. Lowering the principal balance would lower monthly payments since the loan could then be refinanced. Current estimates are that up to 1,000,000 homeowners could benefit from this portion of the settlement, with average principal reductions as much as $20,000 which may reduce your monthly payments.

If you are current on your payments, but owe more on the mortgage than the home is worth:

You may be able to refinance your mortgage to the current lower interest rates, meaning big savings on your monthly mortgage payment. Projections are that up to 750,000 homeowners could qualify for this assistance.

If your mortgage was foreclosed upon by one of the involved servicers:

You may be eligible to receive a cash payment of around $2,000 if your foreclosure was not conducted properly.

Other points to consider

• Assistance will be distributed over a three-year period, but servicers are incentivized to execute the settlement’s requirements as quickly as possible.
• To qualify for a principal reduction, loan modification or refinance, the property must be your primary residence and the loan balance has to be less than $417,000.
• Receiving assistance from this settlement does not prevent you from taking part in or receiving compensation from other legal actions against mortgage servicers.
• Homeowners with FHA mortgages or mortgages backed by Fannie Mae or Freddie Mac are not eligible to receive help through the settlement. If you do not know if your loan falls into one of these categories, you can check at the Mortgage Electronic Registration System database.
• The settlement also sets aside help for borrowers who are unemployed, or who are members of the military. For more information on these programs, contact your servicer.

The bottom line

If it looks like you might qualify for assistance from the National Mortgage Settlement, contact your servicer as soon as possible. They may not have all the answers for you right now – or even be able to tell if you qualify yet – but in the coming months you may be able to get significant help on your mortgage.

For the latest information, visit www.nationalmortgagesettlement.com.

As always, feel free to contact CCCS of SF at 1-800-777-7526 to speak with a counselor about your housing concerns.