How to avoid foreclosure?

Foreclosure is the worst nightmare for a home owner. IF you are stuck in a foreclosure mess, you can avoid it or you can prevent the worst happening. There are some steps which can help you during a foreclosure.

• Most important step to take is to contact your lender. Make your lender aware of your situation. Don't neglect the problem. The more you avoid, the worst it will get. Your lender don't want your home, they just need their money so they can help you out with financing options.

• You should understand your rights during this situation and what your lender can do. You should read all the mortgage conditions properly and can also contact state government office for further information as different states have different laws. Learn as much as you can about foreclosure prevention. You can also contact lawyers for further help.
  

• You can contact HUD approved counselors for help. They are experienced government officials who can help you out in understanding the laws in your state and and will help you in recognizing available options. They can also deal with the lender if you need help.

• Spend your money wisely. You should avoid spending money on unnecessary things. Your main priority should be paying your mortgage payments. You should also use your assets wisely. You should understand what you can sell to raise your cash.
  

Applying for $8,000 tax credit

• Single buyers should have an income less than $95,000 and married buyers should have an income less than $170,000 to be eligible. For full tax credit single buyers should have an income less than $75,000 and married buyers should have an income less than $150,000. Others can apply for reduced tax credit.

• Tax credit incentive is for first time home buyers only. People who have not owned a primary residence for the past 3 years are also considered as first time home buyers.

• 10% of the purchasing amount of the home is provided as credit which cannot exceed $8,000. This money can be used for down payment for buying a home.

• All types of homes including single family homes, condominium units and also manufactured homes are eligible but they should be used for primary residence.

• Closing date should be after January 1, 2009 and before December 1, 2009 to be eligible for full tax credit.

Recapture Tax

Many benefits are provided to first time homebuyer and who apply for FHA financing for buying a home. These benefits include loans on low interest rates and also funds for down payment assistance. These programs are governed by Federal laws. There is "recapture" tax to pay if the borrower meets the following conditions:

• Borrower sells the property within nine years of ownership.
  
• There is a net profit on the sale of the property.
  
• There is a increase (5% per year) in the income of the borrower.
  

But, the borrower don't have to pay the recapture tax if,

• the property is sold after nine years of ownership.
• there is no profit by selling the property.
  
• no increase in the salary of the borrower.
  
• the house is destroyed by any natural calamity.
  
• transfer of property to the spouse or ex-spouse as an agreement of divorce.

Buying a home after bankruptcy

Buying a home after filing bankruptcy is quite difficult. It affects your ability to take a loan in the coming months and sometimes in years but if you take proper steps then you can purchase a home after 18-24 months of filing bankruptcy. You have to wait until your bankruptcy case has been decided.

After bankruptcy, the most important step to take is to rebuild your credit scores. You must keep your credit scores perfect after bankruptcy and should have a steady job. Keeping credit scores perfect for nearly two years will bring back the faith of lenders in you. You have to prove to lenders that you can be trusted on paying back the money you owe. For this, you can apply for "installment loans" which can include student loan, car loan etc. and the only thing you have to do is pay your installments on time.

After improving your credit scores, you can go for FHA home loans as FHA requirements are flexible.

• two years have passed since bankruptcy have been discharged.
• three years have passed since a foreclosure
• all the judgments have been paid.

Your first home loan after a bankruptcy may be available to you on higher interest rates but if you can manage large down payment then, you can get loan at low interest rates.

Common misconceptions about reverse mortgage

# 1: Lender owns your home - False

This is the biggest misconception about reverse mortgage. Borrower owns the home as long as the home is their primary residence. Borrower's need to pay back the loan, when they leave the home.

# 2: Borrower can end up owing more than the value of the home - false

One of the biggest advantage of reverse mortgage is that the borrower can never owe more than the home's value even if the borrower has borrowed more than the value of the home.

# 3: Borrower's home must be debt free - false

It is not necessary that your home must be debt free or there can't be any mortgage on the home. Borrowers can go for reverse mortgage as long as the debt can be paid with some part or all of the funds of the reverse mortgage.

# 4: There are restrictions on the use of money obtained from reverse mortgage - false

There are no restrictions on the use of the funds. You can use the funds for a holiday, paying your debts, paying college fees of your children, anything.

Importance of FHA home inspection

Every home buyer should go for a FHA home inspection. When you want to buy a home, you want the home to be in proper condition. You don't want to face any problems in future or spend thousands of dollars in repair works. Getting a home inspection from a trained expert before buying a home is an intelligent step.

A home inspector will evaluate all the physical conditions of the home including construction, structure and mechanical systems. A inspector will also evaluate the working of major equipments (plumbing, air conditioning, electrical etc.) Inspector will provide the buyer with the detailed information about the home and any repair works that are needed in the home.

One thing home buyers should understand is that the home inspector will not evaluate the value of your home. Home inspection is different from an appraisal. Appraisal provides you with the estimated value of the home which is required by the lender before your FHA loan approval so that you don't borrow more than the value of the home.

FHA loans vs. Conventional loans

FHA loans have many benefits when compared to conventional loans. There are many benefits for the borrower and also for the lender as FHA loans are less riskier for the lenders as the loans are insured by FHA.

• Down Payment: For FHA loans only 3% down payment is required, while for a conventional loan minimum of 5% down payment is required and it can go up to 15%.

• Credit Scores: For conventional loans you require perfect credit scores while credit score is not an issue if you are applying for a FHA loan.

• Monthly Mortgage payments: It is less in FHA loans as compared to conventional loans.

• Property standards: FHA has certain property standards while conventional loans don't have any property standards. FHA Homes should be inspected properly and should be perfect for living.

Also, you can apply for a FHA mortgage loan after two years in case of a foreclosure and after three years in case of a bankruptcy.

Advantages of FHA streamline refinance

Advantages of FHA streamline refinance are:

• Biggest advantage of FHA streamline refinance is that there is no appraisal required. Most people don't qualify because there homes don't enough value, but if your qualify for streamline refinance, then it is not an issue for you.

• Most of the mortgage loans have high closing costs but FHA streamline refinance have very low closing costs.

• FHA streamline refinance can be wrapped up quickly as no appraiser to visit your home or verification of your employment as once you qualify for a FHA loan, these qualifications are carried over to FHA refinance mortgage.
  

• Another big advantage of streamline refinance is that "no income verification", so you don't have to worry about your income if it has been dropped.
  

Common myths of FHA loans

Myth # 1 - Government loans the money

Most common myth about FHA loan is that the loan is provided by the Federal Housing Administration (FHA) which is not the case. Government only guarantees for your loan and because of this guarantee, these loans are less riskier for the lenders or banks.

Myth # 2 - FHA loan takes longer to get approved

FHA home loans take no longer than other conventional home loans if you are properly guided by FHA loan officer who understands FHA mortgages completely.

Myth # 3 - Credit Score doesn't matter

This is neither completely true neither completely false. You must have a strong credit history for the past 12 months or so. You should have made all your payments on time without any delay. FHA may also look at your phone bills, rent and other bills to know credit worthiness.

FHA appraisal

FHA appraisal is a critical component of an FHA mortgage to determine the market value of the home. This market value serves the basis for the maximum FHA insured mortgage loan. FHA appraisal is done for the benefit of the lender and HUD and apart from determining the home value, it als0 provides an examination of the property for any defect that can be harmful for the people living in the house.

FHA appraisal determines the accurate value of the home to be financed which minimizes the risk of the lender because if the borrower defaults on the loan, then the home will provide the means of recovery for the lender. HUD requires appraisals for all FHA insured mortgages. FHA does not take guarantee that the home is in perfect condition but it ensures that the home is in safe and secure condition. Also, the home must meet all the FHA requirements.

FHA appraisers are required to repair or replace anything that affects the safe habitation of the house. FHA appraisers are required to make a complete inspection of the home, both from inside and also from outside. FHA appraisers must ensure that each and every thing is perfect may be its hand-rails, windows, smoke detectors, condition of the roofs and the kitchen. They must check whether all the components are working properly or not.

So, before buying a home, have a proper FHA appraisal so that any defects in the house can be repaired on time.

Tips to secure your FHA home loan

There are certain factors that you must keep in mind to secure your FHA home loan. Below are some simple tips on how you can secure your FHA insured mortgage.

• Credit score is the most important factor. You must clear your previous debts and should increase your credit score before going for the mortgage.

• You should not increase unnecessary debt using credit cards. You must limit its use and your spending money should be cash.

• You should consider your present financial conditions. If you don't have much savings and a good career then first you must improve your financial standing before buying a home.

• You must completely understand the procedure of the FHA loan processing and also pros and cons of the market before applying for the loan.

• You should compare the interest rates and the loan program of several lenders before finanlizing the loan.
  

FHA loan guidelines

When you apply for FHA loan to buy a home, there are certain guidelines that you must meet. Among them most important are your relative mortgage amount and your income. FHA does not want that your mortgage payment (includes principal, interest, taxes) to be more than 31% of your gross income and also your monthly debt obligation including mortgage should be not more than 43% of your income.

You must collect all information and put them in a file send it to an underwriter. The underwriter decides whether you are approved or rejected after reviewing your file. You should understand what are the important information that you must include in your file.

SOME OF THEM ARE:

• Social Security Number
• Address of your residences for the past two years
• Information of your employer for the past two year
• Current gross income
• Complete information about your bank accounts
• Detail of any property you owe.
• estimated value of the home.

FHA closing costs

when you buy a home, there is always a closing cost apart from the down payment. These closing costs are charged to the buyer and are considered allowable and these costs are necessary to close the loan.

The closing cost and other fees that you can finance in your mortgage are:

• Loan origination fees.
• Any credit report costs required for FHA mortgage.
• Appraisal fees which is used to determine home-value.
• Costs included with the title.
• Recording fees and taxes associated with the purchase of the home.
• Deposit verification fees.
  

Advantages of Jumbo Mortgage

Jumbo Loans are simply loan amounts above normal loan amount. Individuals applying for jumbo loans are very rare but they provide borrower with many advantages.

• Simply, it provides you with greater amount of money, and there are no restrictions on the use of money.

• Expensive real estate cost make you to take out a jumbo loan. In some part of the countries real estate costs are very high and jumbo mortgages are the only alternative.

• If you apply for jumbo mortgage for buying a home then the interest paid will be tax-free so you can save substantial amount of money.