Life After Bankruptcy

For immediate release February 16, 2011


Life After Bankruptcy

By Scott Heggs , Sr. Mortgage Originator

Baltimore, MD – Bankruptcy is an uncomfortable subject for a variety of reasons. The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.

• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.

• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.

• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.

• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)

• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

We recommend getting a quote from MortgageSeeker at http://www.mortgageseeker.net/

SUBMITTED BY:

SCOTT HEGGS

410-517-1930

410-517-1933

EMAIL: scottheggs@verizon.net

Nine Ways to Reduce Mortgage Closing Costs

Not only should you prepare for closing costs, you should also plan to negotiate them.


Closing costs are a hidden speed bump in the home purchasing process. Many people are so worn out at that point, that they just pay the closing costs and keep driving ahead at full speed. That’s exactly what many lenders and brokers hope that you’ll do.

Prepare for the closing costs before you get started and they’ll seem like just another part of the process. And the few hundred dollars you save will come in handy when the water heater breaks the first week that you move in!

Check out the following eight tips to start getting an idea of how to cut closing fee costs:

#1: Plan ahead: shop around and get estimates on closing costs from lenders before you get pre-approved for your loan. While you should ultimately look at the closing costs along with other factors like the interest rate , you’ll be able to get a ballpark figure of what they should be. Closing costs are generally 3%-5% of the total cost. If they are more than that, you can probably dismiss that lender.

#2: Simply ask the seller to share or pay for the closing costs. It’s worth a shot, especially in this economy. If the seller is motivated to close the deal quickly, he or she just might agree to it.

#3: Get a Good Faith Estimate. Your GFE is an estimate of how much the closing costs will come to. According to federal law, the actual individual fees can vary up to 10% from the quoted levels in the GFE. Study your GFE and contest or negotiate any suspicious fees (we’ll get to this in later steps). At least a day before closing, ask for you HUD-1 settlement statement. Make sure that this final tally of your closing costs matches the GFE and that no last minute fees have been tacked on.

#4: Ask your broker or lender to explain the closing cost fees to you. If you don’t understand what the cost is for, have them tell you. If you can’t get a good explanation, that’s a sign that the fee is inflated or unnecessary.

#5 Determine what fees are “trash” or “garbage” fees. Are there excessive documenting and processing fees? Lender’s inspection fees? Commitment fees? Assumption fees? Document preparation fees? These can likely be lowered or negotiated.

#6 Check to see how much you’ve been charged for the credit report. Are they charging you $150? It’s probably bloated. And if they are sneaking that one by you, there are likely others.

#7 Make sure that you haven’t already paid any of the fees. You’ve probably already paid an appraisal fee. Make sure that they aren’t charging you twice.

#8 Title Company fees. Lenders or brokers often have a partnership with a title company. Check out the fee and do a little research to see if you can find a cheaper title company to work with.

#9 If you are buying a home, ask the realtor on the seller side to reduce or waive their administration fee. If they want to sell the house bad enough many times they will do this. Also you can ask them to pay for some of your fees out of their commission like the appraisal or home inspection. If the sale is big enough they may well do this.

It may feel like you are at the mercy of your lender or broker when it comes to things like closing fees. You can’t forget, though, that the lender or broker wants the deal to close as much as you do. Remind yourself that you can walk away at any time and it will put you in a much better mental position to negotiate.

Start here to compare mortgage rates from top lenders in our network or just visit www.mortgageseeker.net

Is Your Real Estate Market Overvalued or Undervalued?

Home prices appear to be very attractive right now, after sharp declines following the collapse of the housing bubble. It would seem to be a good time to buy, but what if prices fall still further? Is there a good way to tell if your area is overvalued or undervalued?
Judging whether a housing market is overvalued is more of an art than a science. Economists put a lot of time and effort into crunching numbers to try and determine if a market is overvalued or undervalued, and which way prices are likely to go in the future.

Rent to mortgage ratio

There is a fairly convenient method available to the average home shopper though, that doesn’t require a degree in economics. It simply involves comparing local rental rates to mortgage costs for comparable properties. The beauty of this method is that it automatically accounts for a number of variables, such as income and relative demand, and produces a straightforward number that serves as a good rule of thumb regarding local real estate prices.

The key number here is 15. Historically, annual mortgage payments, including interest, run about 15 times higher than monthly rents on comparable properties in the same area. If the ratio is higher than that, it’s a sign the market may be overvalued. Lower, the market may be undervalued and offer good bargains.

The ratio is based on assuming a 30-year fixed rate mortgage at the prevailing interest rates. To calculate it for your area, take the typical price for a home you’re interested in, then compare it to an apartment or other rental with the same number of bedrooms and similar amenities and quality of living. Assume a 10 percent down payment and the going 30-yearinterest rate . You can use an online mortgage calculator , such as the ones available at the MortgageSeeker web site, to help you calculate the annual mortgage cost.

Lower ratio, stable market
 If the ratio is 15 or below, it suggests the market is relatively stable and further steep drops are not likely. Ratios of 20 and above indicate the market may still be overvalued and could see further declines. Some of the areas that have experienced some of the steepest price declines in recent years still show high price to rent ratios. Both the Los Angeles and San Francisco markets still have price to rent ratios of 30 and above. However, bear in mind than areas with dense populations historically command higher home values and tend have higher price to rent ratios as a result.

There are a variety of ways to determine typical home prices and rents. There are a number of major companies that provide national sales prices, but these tend to deal with price averages and means of all homes, rather than just the ones in the category you’re interested in.

The best way is probably to simply look your local real estate and rental listings online and compare properties in similar neighborhoods. Some real estate companies also track average rents and home prices in their local areas – search “average rents/home prices” with the name of your community to try to find them. It’s not exact, but you’re just looking for a rule of thumb here.

Again, this isn’t a foolproof method but at least can provide you with an idea of how stable prices are likely to be in your area. It’s one more piece of information to consider when making the decision whether or not to buy a home.

To get pre-approved go to Mortgage Seeker at http://www.mortgageseeker.net

The Pros and Cons of a 15-Year Mortgage

So you missed out on last spring's ultra-low rates, those dizzying few weeks when 30-year fixed -rate mortgages could be had at interest rates below 4.5 percent, an all-time low. But you may have noticed that it's still possible to get one of those ultra-low rates - by locking into a 15-year mortgage instead.

On the surface, the 15-year fixed rate mortgage seems like a sober-minded, responsible thing to do - you bite the bullet on the bigger monthly payments, pay off your mortgage in half the time, save a ton of money on interest payments and end up owning your home free and clear before your firstborn is even out of high school.

Big difference in monthly payments
But there are downsides as well. The first of these is that the monthly payment is considerably larger on a 15-year loan than a 30 year one. For example, consider a $250,000 mortgage at today's national rates of 5.26 percent for a 30-year fixed-rate loan vs. 4.78 percent for a 15-year one. Using our MortgageSeeker.net Mortgage Comparison Calculator, we get the following results:
Monthly payments: $1,948 vs. $1,382 = $566 per month more for the 15-year loan
Total payments: $350,721 vs. $497,540 = $146,819 more over the life of the 30-year loan
Total interest paid: $100,721 vs. $247,540 = $146,819 more over the life of the 30-year loan
As you can see, for a loan under these terms, monthly payments on the 15-year loan are more than 40 percent higher than the 30-year loan. On the other hand, your total payments over the life of the loan are almost 30 percent less - a total savings of almost $147,000. That's a lot of money that could be used for other purposes.

Can leave borrowers vulnerable to financial troubles
Even so, many financial advisers recommend that borrowers avoid 15-year mortgages. The main reason is that it locks up more of your money and allows you less flexibility in dealing with unexpected circumstances. A loss of income, unexpected expenses (perhaps medical costs or additional children) or new opportunities to invest the money in other ways could make you wish you had that extra $500+ a month to work with.

A key thing to remember is that most 30-year mortgages will allow you to make additional monthly payments to reduce the principal without penalty . You'll lose the advantage of that half a percent of percent of interest - an average of about $30 a month over 15 years in the example above - but you'll be able to keep your options open in the event you find you have other needs for your money. A lot can happen in 15 years (You can figure the difference accelerated payments would make).

Mortgage interest deduction a factor
The mortgage interest tax deduction also takes a big bite out of the relative savings between a 15- and 30-year mortgage. Since paying less interest means you have less to deduct, this can make the savings on a 15-year mortgage somewhat less attractive than they may seem at first glance.
Many financial advisers will also tell clients that they're better off putting that extra money each month into other investments. Since long-term investments in the stock market have historically exceeded 5.26 percent, anything returns you get above that rate are net gains compared to using the money to pay down your mortgage. Of course, recent history has shown the risks of this approach.

Another consideration is the long-term effects of inflation. Since prices, and incomes, tend to increase over time, your payments over the last 15 years of your mortgage will likely be lower in real terms than they are today - you'll be making them in inflated dollars.

Still a good option for some
All that said, there are still good reasons to seriously consider a 15-year mortgage. Some people like the discipline of being required to make the larger payment each month, instead of just having it be an option. For those who are looking at having children in college or plan on retiring in 15-20 years, it might make good sense to get their house payments out of the way by that time. Making larger payments also means you'll build up equity in the property more rapidly, meaning you'll be less exposed to negative equity in the event home values fall, and less likely to end up "underwater" on your mortgage.

As always, do the math. If you're seriously thinking about going the 15-year mortgage route, use our mortgage calculators to help crunch the numbers and see what makes the best sense for you. Also, talk to your financial adviser to see if there are any other advantages or disadvantages that may relate to your particular situation.

For Free no obligation mortgage quotes please visit www.mortgageseeker.net .