If a court date has been set for the foreclosure of your home, you might yet be able to stay in your home after the court concludes foreclosure. By agreeing to a separate lease-buyback option, you could pay rent to live in the home you once owned and possibly regain ownership that was lost to foreclosure.

Living In Your Foreclosed Home

Is this task as easy as it sounds? No, but it isn’t outside of the realm of possibility either. Your continued reading will shed some light on this matter, possibly helping you to stay put after a foreclosure ruling has been concluded.

A lease-buyback option is something that can take place after the foreclosure decision has been handed down by the courts. In this particular situation, you no longer own the home and the new owner – which is usually your mortgage company – can order you to leave the property.

Congratulations, You Are Now A Tenant

So, why would a mortgage company consider allowing you to stay in a home you could not afford to make payments on?

There are two reasons that come to mind:

• You may live in an area that is economically depressed and finding a new owner could be a very difficult task for the lender. Most lenders want to dispose of a foreclosed home, preferring not to have to deal with a tenant. Since they already have a relationship with you, this is something that you may be able to pull off.

• In addition, since the foreclosure ruling was finalized, your financial situation could have improved to the point where you may eventually be able to handle mortgage payments once again. Perhaps a loss of income brought about the foreclosure and you’ve since landed a new job.

If your one-time mortgage lender agrees to let you stay in the foreclosed home, you will be responsible for signing a lease and making monthly rental payments directly to them. Depending on the terms of the agreement between you and your new landlord, the mortgage company may set aside a portion of the lease money you pay each month as a contribution toward a down payment on your home.

An Unusual Agreement

Then, after an agreed-upon duration of time, one or two years for example, the mortgage company may consider:

• Selling the house back to you
• Allowing you to continue renting from them
• Offering the home for sale to a third party

These types of agreements are not common and you must state your desire to stay in the home before foreclosure is finalized. Once foreclosure has been completed, the mortgage company is under no obligation to work with you and can have you removed from the premises.

Further Reading

Homeowners warned about foreclosure ‘rescue’ scams

Debt Reduction Tips

Home Purchase Loans

Tags: foreclosure, landlord, lease/buyback, mortgages, personal bankruptcy, tenant

Private Mortgage Insurance (PMI) is a type of insurance required by lenders when you purchase a home with less than 20% down. If you cannot come up with enough money to meet the 20% threshold, you can usually still get a mortgage but the lender will want to protect themselves by requiring that you obtain and pay for PMI.

Lots of homeowners dislike PMI, seeing it as an added cost to homeownership. Some consumers are also unaware that PMI isn’t for the life of the loan, that it can be cancelled at some future date.

How To Cancel PMI

• Your PMI should automatically go away when you have paid down your mortgage to 78 percent of the value of your loan according to the terms of the 1998 Homeowners Protection Act (HCA). With certain high risk loans the threshold is 77%; in either case PMI must stop soon thereafter with excess insurance premiums returned to you.

• PMI can also be canceled if your home’s value has increased to the point where your equity in the home is at least 20%. Provided you have been making payments on time and are current with your loan.

When PMI Won’t Die

You may still be paying PMI beyond when you think it should be cancelled if:

• Your home’s value has actually declined. With some areas of the country experiencing a housing correction, your home may now be worth less than what you paid for it.

• There is a second mortgage on your home. If you took out a small equity loan/line of credit (second mortgage) on your home, you’ll still need to pay PMI for the first mortgage until the second loan has been paid off.

One more thing — you may need to obtain (and pay for) an independent appraisal to verify your home’s value before PMI can be cancelled.  Only after confirmation is received and everything verified will PMI be removed once and for all.

Tags: escrow, home insurance, mortgage interest, mortgage payments, PITI, Property Taxes

Financing Your Home

Prior to 2007, at least for the first several years of this decade, qualifying for a mortgage wasn’t nearly as difficult as it is today. Mortgage qualification standards were lowered for a time, meaning tens of thousands of homeowners purchased homes who should have never been qualified in the first place.As a result of the lowered standards, many of these same homeowners have defaulted on their loans, unable to keep up with payments. Creditors have finally raised the bar, making it tougher for consumers to qualify for a home loan.

If shopping for a home mortgage, there are four criteria you must keep in mind when applying. Where you stand in each area can determine if you are approved or not and what your loan terms will be.

Home appraisal – You purchased a 4 bedroom, 3 bath colonial, paying $385,000 for the home, be putting $85,000 down. With $300,000 to finance, your mortgage broker will make sure that the home is worth the amount you are paying for it. In this current market of declining home values, that isn’t a sure thing.

Your credit rating — Your credit reports will be accessed and your credit score will be obtained. Depending on how high your score is, the mortgage terms (interest rate) will be set accordingly. Expect a lower rate if your credit is excellent.

Your capacity to repay the loan — Can you afford to repay the loan? Do you have sufficient assets and income to meet monthly payments? These questions must be answered before a loan offer is given.

Your employment — How long have you been employed? Where do you work? Are you paid a salary, salary plus commission, or are you paid hourly? These questions are the final determining factor on whether you will be offered a loan or not.

The tougher standards may seem unfair to some consumers, but they are in place for your protection and to protect the lender’s assets. If your credit is good or excellent and all of the other criteria have been met, then receiving approval for a home loan will likely happen.

Tags: escrow, home insurance, mortgage interest, mortgage payments, PITI, Property Taxes