Forget for just a moment the current problem impacting the real estate market — sub-prime lending. Sure, lending to people who are a higher financial risk has led to the increase in the current mortgage default rate, but that isn’t the only thing acting as a drag on some local housing markets.

Instead, there is one problem that continues to grow and, if left unchecked, will affect more homeowners than the sub-prime mortgage meltdown. I’m talking about property taxes which everyone has to pay, but in some markets around the country people are paying thousands of dollars more annually than just a few years ago. What makes all of this worse, is that in some of these same markets home values have actually decreased.

Here are some examples that I have learned about personally or have discovered via my research:

• A home that has been sitting on the market in Glen Rock, NJ has all of the features that a buyer would want and is in a town that is very convenient for New York commuters. With a $500,000 price tag it is listed at just below market value. I’ve learned, however, that the property taxes on this home has risen to just over $1000 per month or $12,000 annually! Add that cost to the mortgage, insurance, utilities, and upkeep and there isn’t any question why the home has remain unsold for nearly one year.

• For years, mobile home owners have been exempt from paying property taxes in Massachusetts. In one community, Chelmsford, the town has decided to levy a tax to bring in additional revenue. Up until recently, jurisdictions did not tax mobile homes because they are considered to be low-income housing. The move by the town of Chelmsford will add $30 per month to the rent bill for some mobile home residents.

• Minnesota residents understand the negative effect that increased property taxes has on communities. The state ranks as one of the worst when it comes to home sales thanks to property taxes which have risen by $2 billion over the past five years.

• Washington, DC residents have recently learned that their sky high property taxes are no longer the worst in that region. Unfortunately, the good news isn’t that their taxes have gone down, rather some Virginia and Maryland

communities have raised them much higher. In addition, the district offers a much more generous homestead benefit than its adjoining states, making DC life a little more appealing for taxpayers.

So, the next time you find yourself upset over the mortgage meltdown, pick up your local property tax bill and see how it has changed over the past five years. It could be that a much deeper crisis can be found on the bills of tax paying homeowners across the country.

Tags: home mortgage, home value, Property Taxes, tax rate

Financially strapped consumers are losing their homes to foreclosure as higher mortgage payments and other expenses are making it difficult for some to keep up with payments. Although foreclosures are on the rise, it isn’t a foregone conclusion that you must lose your home. In fact, if you take certain action you can avert losing your home despite your present difficulties.

How To Avoid Home Foreclosure

You only need to watch the news or read internet reports to learn that home foreclosures continue to be a problem in many markets. But, what you may not know is that losing your home to foreclosure doesn’t have to happen.

You can avert foreclosure by following these steps:

Communicate with your lender. Notifying your lender that you are having difficulty making payments is important. Some will work with you, some will not. Missed payments could be tacked on to the end of your mortgage, giving you a little bit of breathing room allowing you to get back on your feet.

Get out your mortgage agreement. Find out what your legal documentation says about your loan. Every state has specific rules and regulations regarding foreclosure; familiarize yourself with the laws in your jurisdiction by contacting your state’s housing department.

Seek counseling. A housing counselor can offer assistance, people who are usually available through your state’s housing department or county (or city) housing agency. A counselor can advise you on how to reorganize your finances or share other options to delay foreclosure including discussing your consumer rights.

Sell your home. If staying in your home doesn’t look like a possibility, then consider listing it for sale. Contact your mortgage lender to see how much time you have to sell your home before foreclosure. If you are working with a realtor and your home has a good chance of selling, your lender should be agreeable to this arrangement. You’ll still be responsible for back payments, interest charges, taxes and any deficiency from the sale of your home.

Assumption of the loan. Even if your mortgage agreement doesn’t permit the assumption of a loan, your lender could be agreeable to this method if a qualified buyer can take over payments. You may end up losing whatever equity you have in the home, but you’ll save yourself from having your credit trashed due to foreclosure.

In some cases you may be able to give your home back to the lender and have your debt forgiven. Provided that there are no other liens on the property, your lender may be agreeable to this method.

Some steps to avert foreclosure are more harmful to your credit than others, but if your options are limited then so will your choices be. Taking action sooner, rather than later can give you more latitude and give you a fighting chance to stay in your home.

Further Reading

In Boston, Residents Seek Face-to-Face Advice to Avoid Foreclosure

Mortgage Lending Guides

Should bankruptcy laws be tweaked to help homeowners avoid foreclosure?

Steps To Take When You Cannot Pay Your Mortgage

Understanding and Reporting Suspected Predatory Lending and Fraud

Tags: foreclosure, home mortgage, HUD, mortage lender, mortgage broker, mortgage fraud, second mortgages

You’ve found the home of your dreams, but buying the home depends on securing financing. Recent news that lenders have tightened up their requirements has you a bit nervous; even borrowers with good credit are finding it more difficult to get a mortgage.

Although credit has been tightening since the sub-prime mortgage fiasco blew up earlier this year, you can still get a home mortgage. Let’s take a look at some mortgage essentials to help you get started as you search for the right home mortgage.

What is a Mortgage?

A mortgage is a debt incurred by homeowners by means of a loan made by a lender covering the purchase price of the home minus your down payment. It is a contractural agreement which allows the lender to repossess your home if you default on the loan.

The Three Part Obligation Process

When you seek mortgage lending there are three components to the loan:

Principal: the original amount that you borrow with an obligation to repay the amount over a set term.

Interest: a percentage amount that you agree to pay the lender for use of the principal amount until the full amount is repaid.

Term: the length of time (generally in months) to repay the loan amount .

Over the course of the first years of the loan, most of the money paid toward the loan is on the interest while during the last years of the mortgage term the bulk of the monies covers the principal.

A Matter of A, B, C and D

Four grades of loans are available: A, B, C, and D. Buyers with good credit can get conforming “A” loans which offer the lowest and most favorable mortgage rates. The lower your credit rating the lower grade loan you are eligible to receive. Lower grade loans carry a higher interest rate and approval is harder to come by. With many lenders suffering stiff losses following the sub-prime meltdown, it has become more difficult to get obtain a home mortgage.

Some Points to Consider With Home Purchase Loans

The amount of money you will need to borrow is based upon your purchase price minus your down payment. Many lenders want to see you put at least 20% down, but some will allow less which will increase your monthly mortgage loan payments. You’ll pay a higher interest rate as the lender assumes a bigger portion of the risk associated with the mortgage loan. You may also be required to carry Private Mortgage Insurance (PMI) which will tack on a monthly charge to your payment.

Escrow is funds set aside by the mortgage company and paid by you to cover home insurance, taxes, and other expenses related to your home.

Points can be charged in order to secure a lower interest rate. For every point charged, you will be expected to pay 1% of the home’s purchase price at closing.

Closing Costs are paid to cover title search, attorney fees, taxes, documentation, and any other fees associated with the sale of the house. This burden falls on the buyer, but it can be negotiated with the seller or the bank may reduce or forego their portion of the costs related to the mortgage.

Finally, some loans will penalize if you pay off your mortgage fast; check the contract closely to learn what your obligations are and use mortgage calculators to compare the various mortgages available to you.

Tags: buying a home, home mortgage, home puchase loans, mortgage lending, mortgage loans