If I foreclose, how long before I can buy a house?

Posted on Jun 4, 2010 by Paul Kaplan

 


Financing a home after foreclosure is possible for most homeowners.  Those who default on their mortgages due to economic hardships, such as job loss, may receive approval for another mortgage in as little as two years, while it may take more than seven years for strategic defaulters to be approved.

Lenders utilize several methods in determining whether to grant mortgages, including the amount of money borrowers have saved; employment histories; and payment history.

According to the chief economist with the Mortgage Bankers Association, lenders may be more willing to finance a mortgage for a borrower who defaulted on their mortgage as a result of factors beyond their control.
Some homeowners who strategically default—intentionally not meet their mortgage obligations although they have the financial means to do so—assume they can raise their FICO scores by paying their others bills on time.  However, most future loan underwriters will scrutinize their records very closely, and if they determine the borrower strategically defaulted on their previous mortgage, the repaired credit score will not overshadow the walkaway.

Although not impossible for strategic defaulters to finance another home purchase, it likely will be more difficult.  Lenders may ask for down payments of 30 percent or more to provide sufficient collateral to enable the bank to recoup most of its money in a foreclosure.  These borrowers also may be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive.

To read the full story, please click here.

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Good real estate news: Home equity is rising again

Posted on Feb 19, 2010 by Paul Kaplan

Summarized from the Washington post….
Numerous articles have reported that homeowners are underwater and that strategic defaults are increasing.  However, a little known statistic by the Federal Reserve shows that home equity again is on the rise.
 
MAKING SENSE:
 
The Federal Reserve conducts substantial research on mortgage balances and home-value changes in hundreds of local markets nationwide and reports its finding quarterly.  According to the Fed’s most recent “flow of funds” survey, homeowners’ net equity increased by nearly $1 trillion compared with the recession’s lowest point between the first and third quarters of 2009.  From June 30 to Sept. 30, net equity rose by $418 billion.
According to a report by Zillow.com, the overall negative equity rate among U.S. homeowners remained flat in the fourth quarter at 21.4 percent.  This report, combined with other housing factors and studies, may indicate that the unprecedented reduction in home equity is shifting.
Some homeowners, especially those in areas with high foreclosure rates, are choosing to strategically default on their mortgages, even though they can afford the mortgage.  Many homeowners who choose this approach do so because they do not see an economic rationale in continuing to make their mortgage payments.  Homeowners considering this option should be aware of the negative effect it will have on their credit status.  Foreclosures can remain on credit reports for up to seven years, likely increasing the interest rates the consumer pays for credit, and making it more difficult to receive approval on a new mortgage loan.

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Trust issues with agents

Posted on Jan 7, 2010 by Paul Kaplan

Thought I’d repost this from www.housechick.com because I think its very relevant. It stresses the importance for buyers to get PreQualified with a lender PRIOR to looking for homes.

Do You Trust Me?
January 7, 2010 | By Kelley Koehler | Filed Under Home Buying, Loans and Financing

…in both the real estate and mortgage industries, there’s a decent amount of distrust between consumers and lenders, between clients and real estate agents. Historically, there’s been some amazingly dishonest people who have generally brought down the overall reputation of agents and lenders. Also, agents and lenders have a reputation for the hard sell, for pestering and annoying and pushing a sales message beyond what is appropriate.

(We’re not all like that. I promise.)

Anyway. We were talking about people shopping for agents and lenders online. I’d say 90% of my home buyers contact me without having talked to a lender first, or even really thought much about talking to a lender and getting pre-approved for a home loan. In my experience, that’s because people don’t know they need a pre-approval that early on in the game. He contests that people don’t get the pre-approval because they don’t trust the lenders either.

I say people don’t get the pre-approval because of a lack of knowledge about this process that most only go through very few times in their lives. He says it’s a trust issue.

What say you?