Most certainly, the national real estate landscape has quieted, with home prices and sales down over the past year. Even with the reduced mortgage rates, many people will find it difficult to secure a home loan.

Consumers who are locked out of the housing market can still get in with a little creativity on their parts. By leasing a home with an option to purchase the property within a specified period of time, home ownership could be within reach.

A lease option is a terrific way for people to get into the home they want right now and live in it as a tenant. Then, at some point within the option period, usually one to three years, renters can “opt” to purchase the home for a predetermined price.

What you should know about a lease option:

• Lease options are typically for a one to three year period. If you want the home during that time, you can opt to buy it or walk away and allow the landlord to sell it to someone else.

• You’ll be expected to pay an option deposit which will be applied to your purchase. In addition, you may be charged an amount over and above your monthly rent money which coupled with the deposit be applied to your home’s purchase.

• If you decide that you don’t like the home, you can walk away from it without obligation to purchase it. Depending on the terms of the agreement, you may or may not get the deposit and extra monthly payment monies back.

• A lease option allows you to accumulate money which will act as the down payment for your home. Many consumers find that coming up with thousands of dollars for a down payment is impossible. The accrued funds will act as your down payment.

Of course, you must have good credit in order to qualify for a mortgage once you exercise your lease option. Make sure that your credit reports are clean and your credit score is good enough to qualify for a loan. See a mortgage professional to get pre-qualified for a loan before exercising your option.

A lease option serves as a method of forced savings of sorts, money you’ll come up with on a monthly basis which will be added to your down payment. Not every seller will agree to this option, but in a slow market presenting a lease option could be one way that a seller gets out from underneath his property, but one to three years later.

Tags: lease option, lease purchase, mortgage

You’ve decided to go ahead with an important consumer purchase, perhaps that new car you always wanted even a vacation home and you receive a nasty piece of information — your credit is awful. “This can’t be!,” you think but according to at least one of the credit reporting services you aren’t even fit to buy a new shirt, let alone a high ticket consumer item.

Some consumers have bad credit because of action they took which caused accurate negative information to be added to their record. But, for many other consumers inaccurate even false information could have found its way into their reports.

How To Fix Your Credit Report

Your credit report won’t fix itself, but with your pro-active work you can take care of each mistake one by one.

To get started you should:

• Retrieve copies of each of the three major credit reports. These are available for free from AnnualCreditReport.Com, a service of the Big Three credit reporting services: Trans Union, Equifax, and Experian. By law, the companies must allow you to access your reports once annually for free.

• Examine the report closely to make sure that your name, social security number, address and other personal information is correct.

• Check your individual accounts as they should each be in good standing. If not, find out the reason why an account isn’t in good standing. If it is due to something you did, then you cannot correct this problem other than making future payments on time. If there is an error with the account, contact the appropriate credit reporting service and explain to them what information you found is incorrect.

Notifying the Credit Reporting Service

If you discover an error, make a copy of the credit report and circle in red what you believe to be wrong information. Then, visit the Federal Trade Commission’s site and copy their sample dispute letter and change it accordingly. You’ll be sending the letter and your credit report to the service.

The credit reporting service must launch an investigation within thirty days, contacting the creditor on your behalf. Please note that the credit reporting service can come to any number of conclusions based on their investigation:

• Information that you dispute which cannot be verified will be deleted from your file.

• Erroneous information must be corrected.

• Incomplete information must be completed.

• Information belonging to another consumer must be removed from your file.

Not all investigations will be ruled in your favor. Perhaps you overlooked an account or after correcting certain information you could still have negative, but accurate details on your report. You do have the right to attach a letter of explanation to your credit file which can help explain your position. Send a copy to the business in question too so that they have your dispute on file.

Wrong information on a credit report isn’t the end of the world, but not responding can be a problem — take control of your credit today and order your credit reports and obtain your credit score (which is an extra charge).

Resources

Check Your Credit

Federal Trade Commission

Financing Tips

Tags: credit report, credit score, Equifax, Experian, FTC, Trans Union

You are behind on your mortgage payments and are struggling to keep up with your credit card and car payments. Food and gas have gone up in price and your recent raise at work was a paltry 2% — moreover, your job may be outsourced to China or India in 2009, putting additional pressure on you.

To top it all off, your mortgage rate will reset this summer adding an additional $300 to your monthly expenses. Worse, you cannot refinance at a favorable rate because your creditworthiness has slipped due to your late payments.

Does this scenario sound far-fetched? Unfortunately, it isn’t — at least for some cash-strapped consumers. Indeed, although mortgage rates have dropped and are near historic lows, some consumers are finding that they cannot refinance, putting themselves into a precarious position: should they simply walk away from their homes?

Just Walk Away, Renee

One website is encouraging consumers to walk away, but I’m not going to link to them. There are some serious consequences to abandoning your financial obligations, long term headaches you should know about. Let’s take a look at the consequences and what some options are available for you.

Consequence Of Leaving Your Home Behind

Of course, you can simply pack up your goods and leave your home. But, if you do then you’ll quickly discover:

Your creditworthiness will nosedive. If you walk away, your home will be foreclosed and your credit will plummet. Getting a new job, renting an apartment, or doing almost any other activity which requires someone to access your credit report will become very difficult. If you think that you have problems now, just wait.

Your other creditors will take action. Creditors share information about you with each other. If you walk away from your home, then your credit cards will likely reset to a default rate and you’ll be ineligible for new credit, perhaps for many years.

Smart Action You Can Take

If you aren’t able to refinance your home and you cannot afford future payments, then the following should be considered:

List Your Home. Seek out the services of a real estate agent who can help you sell your home. You can explain your plight to her, but request that your financial situation not be made known to potential buyers. You don’t want a “fire sale” for your home, you would prefer to get out from under this obligation unscathed.

Sell Your Home. Last week, I made mention of one option for getting out of your home — short selling. In summation, short selling allows you to find a buyer who offers to buy your home for less money than what you owe on your mortgage. Although this is something mortgage brokers hate (and aren’t required to accept) there are certain situations where a short sell makes sense. Please read that article for more information.

Do Not Act In Haste

Perhaps the best advice for you is to not act in haste. Take care that you don’t fall prey to scams where someone will offer to lend you money for the short term, but for a high rate. There are people who are looking to entice cash-strapped homeowners into taking out high-rate second mortgages which can only worsen your problems.

Above all else, talk with your current mortgage lender and see what can be worked out. Get help through a credit counselor and only consider personal bankruptcy as a last resort.

Further Reading

Get Above Water: When You Are Struggling to Make Mortgage Payments

Debt Management Tips

Home Refinancing (Tips) 

Tags: home refinancing, mortgage, mortgage reset, real estate, short sell