Even with bad credit, as a homeowner, you have several options available to you through the subprime (also known as non-prime) mortgage market including:

o Refinancing with a cash back or debt consolidation loan to help you rebuild your credit and raise your low credit scores by consolidating your 1st and 2nd mortgage loans, and using the extra cash from your home equity to wipe out compounding credit card interest and consolidate your debts.

o Refinancing your variable interest rate first mortgage, second mortgage or home equity line of credit (HELOC) into a fixed interest rate loan which can save you thousands as interest rates continue to climb.

o Cashing out your home’s equity to finance home improvements. Your timely payments will help you rebuild your credit as you build more equity and value into your home.

o Refinancing with a 40 year fixed rate loan, an interest only loan or a hybrid loan if you’re short on money and have a hard time paying your bills. The monthly savings off your mortgage payments could provide some much-needed financial relief as you work towards getting back on your feet. Hybrid loans are a combination of fixed rate and adjustable rate mortgage (ARM) loans, which is why they are also known as “combo mortgage loans.” These loans give you a lower interest rate than fixed rate loans and are less risky than 1-year ARMs.

Bankrate states that subprime mortgages are for borrowers with FICO credit scores under 620. Bankrate goes on to say that subprime loans have higher rates than equivalent prime loans. How much higher depends on factors such as credit score, size of down payment, and what types of delinquencies you’ve had in the recent past. From a mortgage lender’s standpoint, late mortgage or rent payments are worse than late credit card payments.

According to the Mortgage Bankers Association, in 2003 the lenders issued over $276 billion in subprime mortgage loans, roughly 14% of all mortgages, compared to 11% in 2001. The subprime mortgage market witnessed a boom since the 1990s. As a result of this boom, subprime customers seeking bad credit mortgage loans or mortgage loan refinancing no longer have to settle for the first lender that will provide credit. The increased competition within the subprime market has resulted in putting borrowers more in control of lending process by providing them with more choices in lenders and more ways to shop around for the most competitive rates.

Depending on what your situation is, you may end up with a loan that doesn’t carry that much higher an interest rate than a traditional 30 year fixed rate mortgage, and the fees could end up being fairly reasonable. No matter what, though, the rates you get on your bad credit mortgage loan through a subprime lender will definitely be a lot lower than credit card and auto loan interest rates. Besides, you may be able to claim 100% of the interest you pay on your bad credit mortgage loan as tax deductions.

Another thing to remember is that you may be able refinance with a lower interest loan once your FICO credit scores rise to 620 or higher, but you’ll get better interest rates and loan terms once they’re over 650. Janette E. Jones, a mortgage consultant in Bethesda, Maryland states that if your credit score is 650 or above steer away from subprime lenders because you can find a better rate elsewhere. So, refinancing now with a bad credit mortgage loan through a subprime lender may be just what you need to start rebuilding your credit and raising your FICO credit scores in the short term, so you can look forward to paying much lower mortgage rates on a new refinance or second mortgage with much better loan terms later on down the line.

Conventional loans

The traditional method of financing a home, these are usually 15-year or 30-year fixed interest loans.

FHA and VA insured mortgages

These low-cost fixed-rate mortgages are available to certain home buyers on properties that meet stringent federal standards; however, FHA loans can sometimes be designed to include rehab costs for properties in need of repair. The seller generally pays points on FHA-insured mortgages, and always does for VA loans. VA loans require little or no down payment.

Adjustable rate mortgages

Adjustable rate mortgages offer fluctuating interest rates based on a financial index; typical indexes used include the Cost of Funds Index and the interest rate on one-year constant-maturity U.S. Treasury securities. While these mortgages usually offer a discounted rate at the start, they often can result in higher interest rates and consequent higher monthly payments, creating difficulties for some borrowers.

Graduated payment mortgages

These newer fixed-rate mortgage arrangements allow buyers to purchase a more expensive home than they might otherwise be able to afford, with payments increasing gradually over the life of the loan. One drawback to these loans is a side effect known as negative amortization; put simply, payments in the early stages of graduated payment loans may not cover the interest due, increasing the overall amount of debt on the home. This can result in negative equity, a major difficulty if the borrower wishes to sell the home during the first ten years of the mortgage’s life.

A variation on the graduated payment mortgage is the adjustable graduated payment plan; this works on the same principle, but the interest rate varies according to a financial index. Because payments are gradually increasing, interest rate hikes can produce unpleasant “sticker shock” for unprepared borrowers.

Balloon payment mortgages

Available as fixed-rate or adjustable-rate loans, these mortgages are short-term loans, usually lasting five to ten years. At the end of this term, borrowers are required to either pay off the entire remaining balance, or to refinance at the prevailing rates at that time. These mortgages are primarily useful for borrowers who expect the interest rate to decline within the next five years and intend to refinance when that occurs.

Assumable mortgages

By assuming an existing mortgage, sometimes with an additional up-front payment, borrowers can often obtain a lower interest rate than the prevailing market will allow. The lender must approve of the arrangement, and the borrower must be creditworthy in order to qualify. Most FHA and VA mortgages are assumable for qualified buyers.

Austin homebuyers can learn more about these mortgage options and many others from the loan experts at Capital City Funding. Conveniently located within the offices of Capital City RE/MAX, this FHA and VA approved in-house lender provides a wide range of financing options and services for home buyers. Affinity Properties, in conjunction with Capital City RE/MAX, is proud to offer these lending services to their clients; together with RE/MAX, Affinity Properties is committed to providing the highest levels of customer service and convenience to home buyers and sellers throughout the Austin area.

Loan Modification Goals

Generally speaking, the primary reason that borrowers seek to have their home loans modified is to reduce the amount of their monthly payments. This result can be achieved by reducing the interest rate of the loan, extending the repayment period of the loan, preventing an interest rate from adjusting upward, reducing the principal balance owed, eliminating a negative amortization term, adding delinquent payments to the balance, or any combination of the aforementioned. It is not surprising that the modification goal most sought by borrowers also happens to be the request lenders have been most unwilling to grant: principal balance reductions. Although reductions in balances create significant losses for banks, it should also be noted that homeowners have been generally unwilling to continue to make mortgage payments when they believe that their home’s value will not exceed the amount that they owe against the property.

Therefore, the failure to reduce balances via the loan modification process, coupled with declining housing values, may account for the U.S. Comptroller of the Currency’s finding that the majority of loans become delinquent shortly after being modified.

The Process

Although loan modification procedures and requirements vary from bank to bank, the typical process begins with a borrower contacting the bank’s loss mitigation department to request a loan modification. The lender will then send a loan modification application and forms to the borrower to be completed and returned to the lender. The bank will also require other documentation to be provided by the borrower in support of the application. This documentation may include bank statements, tax returns, pay stubs, a hardship letter and an appraisal or broker’s price opinion to show the current value of the property. After all of the requested documentation has been received by the lender, a bank representative or negotiator will eventually contact the borrower to make a proposal of the new loan terms or simply reject the initial modification application altogether. The borrower then either accepts the bank’s proposal or negotiates new terms until an agreement is reached and new loan documents are formally executed. It is also advisable for the borrower to regularly contact the loss mitigation department throughout the process to ensure that all documentation is being received and that the modification request is proceeding in a timely fashion.

Obstacles to Modification

The most obvious obstacle to successfully modifying a home loan is the borrower’s inability to qualify for the new modified loan. Once again, lender eligibility requirements for modification can differ greatly. However, Fannie Mae and Freddie Mae have implemented a Streamlined Modification Plan to more effectively respond to the increasing number of loan modification requests. Under this plan, the borrower must satisfy the following criteria: 1) the borrower has not filed bankruptcy; 2) the borrower’s existing loan was originated prior to January 1, 2008; 3) the property securing the loan is owner-occupied and a single family residence; 4) the borrower is at least 90 days delinquent on the existing loan; 5) a 90% or higher loan-to-value ratio is present with the existing loan; 6) the payments after modification do not exceed 38% of the borrower’s gross monthly income; and 7) the borrower must successfully make 3 consecutive monthly payments after modification to demonstrate an ability to pay before the modification is formalized.

Also, lenders are generally under no legal obligation to modify loans for borrowers. Consequently, if a modification request becomes too cost prohibitive, banks will often take their chances with the foreclosure process instead. Lenders may also have inadequate staffing to handle the increasing number of modification requests without frequent borrower follow-up. A borrower’s property might also serve as security for more than one loan, and it can often be challenging to coordinate modification terms between multiple banks. Further, if the loan has been sold by the bank on the secondary loan market to any number of potential investors, the original loan will often be split into different fragments before pooling them with other portions of loans as mortgage-backed securities. In this case, it can be very difficult to coordinate with the many investors to obtain approval for the modification.

Finally, borrowers should be weary of a large number of fraudulent companies attempting to assist homeowners with the loan modification process. The mere fact that these companies are using seemingly reputable television commercials or websites as advertising mediums should not alleviate a borrower’s concerns. The rapidly increasing number of loan modification scam-artists has temporarily caught law enforcement off guard and it may take some time before these culprits are apprehended and their brazen actions are quelled. In the meantime, borrowers should be especially cautious when dealing with companies that demand fees in advance of any services to be provided as this practice in and of itself is prohibited by most state laws.

For further assistance with the loan modification process, it is advisable to contact an attorney or your local REALTOR®. In addition, the U.S. Department of Housing and Urban Development has a list of approved housing counseling agencies at http://www.hud.gov. When a borrower attempts to personally modify a home loan, it is essential to identify modification goals, understand the particular lender’s modification requirements, frequently check on the status of the application’s processing, and by very patient.

The concept being birthed in 2007, was in response to the treatment homeowners were facing from mortgage companies and to the foreclosure crisis that took place. It has been stated that the basis for these new rules are to protect future home buyers from mortgage companies.

The Foreclosure Crisis

Within the late 2006, the housing industry felt a large blow when a mass amount of foreclosures occurred due to rates on mortgages and also because of the fact that many of the new loans were made to individuals with either bad credit or too low of an income.

Experts believe that the basis for so many of these home loans being in place was the fact that many homeowners thought they could reap benefits when refinancing later on. Even though, their ideology failed because with the interest rates reset higher, refinancing was hard to come by which led to approximately a million foreclosures.

Mortgage lenders, banks and other financial institutions felt the impact dramatically reporting 100’s of billion dollars in losses. Not only was the housing industry devastated, but the US economy in a whole was also rocked by the housing crisis. These issues led to the US Federal Reserve cutting down interest rates and to the creation of the economic stimulus package which was passed by the government in 2008 to help offset debt and to spur on economic growth and instill belief in the US economy.

The Economic Stimulus Package

The Economic Stimulus Package of 2008 was passed in order to restore good faith within the economy. Its main purpose was to provide assistance to low and middle income citizens. From the economic stimulus package, all recipients were set to receive at least $300 and an extra $300 per dependent under the age of 17. The maximum pay that a person would receive would be no more that $600. Any individuals with an annual income over $75,000 would not receive any monetary funds except for those who had qualifying children.

In addition to citizens, the law also applied to businesses offered them certain tax incentives. Those include tax deductions on eqiupment meant to improve ones business and an increase in how much a business can deduct in business expenses.

In an article by James Temple from SF Gate he lists several key changes in mortgage practices that was just passed on Monday.

General Mortgage Rules:

- Prohibit creditors and mortgage brokers from coercing appraisers into misstating a home’s value.

- Require additional information about rates, monthly payments and other loan features in all advertising.

- Ban seven deceptive or misleading advertising practices, including calling a rate or payment “fixed” when it can change.

Lending Rules For Higher Priced Subprime Loans:

- Force lenders to consider a borrower’s ability to repay loans from income and assets other than the home’s value.

- Require lenders to document a borrower’s income and assets.

- Ban penalties for borrowers who pay off loans early, if the payment can change in the first four years. In certain cases, a prepayment penalty period can’t exceed two years.

- Mandate that creditors ensure certain borrowers set aside money to pay for property taxes and insurance, by establishing escrow accounts.

In reference to the new mortgage rules, many claim that these rules will assist many homeowners and aspiring homeowners from companies that prey on them to make a profit despite the views on their practices are questionable. Yet with this belief intact, many individuals still hold firm in their opinion that these rules are just a tip of the iceberg and much more needs to be done within the housing industry and in relation to some of the illegal practices carried on by some of the lending companies.

While the direction and strength of housing construction are in question. Other factors are clearer. One, whether housing demand slows, remains slow, or picks up and remains steady for the remainder of the century, what we do know is that the United States is on track to reach 430 million by mid century. This is an increase of 120 million. There can be no question that this factor alone requires increased housing supply and housing demand. At the same time, we know that the population is aging. An aging population implies an steadily increasing amount of independently living people. This also implies increased housing demand. At the same time, the number of children per family is falling as well. Construction costs are rising. Debt availability is constrained and will remain much more constrained. These clues give some direction in an otherwise confused real estate investing environment. Likely safe investment strategy includes:

Invest in projects that can support more households in the same footprint. The combination of increased costs, smaller families, and an older citizenry recommends multifamily living and allowances for more independent choices in the same space.
Invest in major cities with the heavy knowledge work. The trends underway strongly support increased urbanization. Investing into the trend offers significant opportunity.
Current population losses in small towns and cities will continue. Some smaller cities will develop momentum, but a significant portion will “atrophy” as urbanization spreads to cities without the write economic drivers – knowledge work, higher education centers, and commodity driven business. Stay away from markets that may fall in this category.
As the population ages and demographically focus reduces the attention on children, schools, and youth activities to older adult social interests. Because of this, housing supportive of these priorities will thrive. Properties near entertainment will do well. Properties with great access to employment and adult education have an advantage. Also, properties offering community activities, fitness, and business centers could do better.

Investors who focus on the cross section of trends will fare well even if population growth slows steadily because these items will create value in the face of this condition.

However, it is imperative to note the different effects of this type of financial status vis-à-vis your credit report. The record will be indicated in your credit history and will definitely stay there for up to ten long years. This is the very reason why before applying and filing bankruptcy, you need to carefully analyze and think about your decision ample times before finalizing everything.

For credit reports that are already tainted with declared bankruptcy, the very normal consequence would be with the difficulty of getting another loan in the future. Although you can still possibly gain one, it is still very important to note that the level of difficulty as well as the chances of being approved is quite minimal. The reason for this is that most banks or lending companies already assume that if you have a bankruptcy record, you are a big liability or risk in the first place.

In planning for home purchase, the very first thing you need to do is to check and assess your credit report particularly for errors. In recent years, the federal government has discovered innumerable cases of credit report errors that make a significant difference in a person’s credit report. Hence, borrowers are advised to check their credit standings every 12 months to ensure accuracy of their copy.

It is then important to rebuild your credit to ensure mortgage lenders that you are already eligible for the loan and will not be a liability to them. It is your responsibility to prove to lenders that you can go beyond your bad financial history. In rebuilding your credit, you can start by obtaining a credit card that is basically secured by an account deposit. It is good liquid collateral that can support your qualifications.

Bankruptcy means you are not yet allowed to make or file your application for another mortgage loan. In most lending companies, you are allotted 18 months to two years before you are released by the court that is in charge of your bankruptcy status. Furthermore, the government’s Federal Housing Administration will duly recognize your credit which will be re-established when a couple of years have already passed.

Bankruptcy is an unwelcomed and deteriorating reality that most home owners face in the midst of the global financial crisis. The modern trend of things makes it difficult for home owners to go beyond the cycle of bankruptcy. However if you have been victimized by it, then you still have the power to change your misfortune by rebuilding your credit and bounce back to your financial stability.

They had dreamed about someday owning a home. They wanted to get into a good part of town but the houses were already way out of their range. They opted for an older condo in an expensive neighborhood on a golf course.

The payments were high but not impossible. They were both up for raises. They took a mortgage that would start low for the first 3 years and then go up. By then they should have at least two pay increases. Since the payments were so low initially, they both went out and leased new cars. They were living the life of riley, as the old timers called it.

Well, the pay raises never came. In fact, just the opposite happened. Jesse’s company cut his hours. Sandra’s office layed off some people. She felt lucky to have a job at all. All the time the payment increase loomed in their thoughts.

Jesse applied for several jobs with other truckers but everyone was cutting back. He really couldn’t take a second job because his hours were so sporadic. If his company wanted him to drive to Texas, he would be gone several days in a row. It wasn’t possible to find a second job where you could miss a week of work.

The first couple of months after the mortgage payment increase, they were able to make the payments by taking a cash advance on their credit cards. Soon their cards were at their limits. They had to make the next house payment around the 15th of the month when they got paid again. They didn’t know what they would do the next month.

For the first time in their marriage they started to fight. At first it was over something big but as time went on, they started arguing about everything. Jesse was drinking more and often fell asleep on the sofa, never even coming to bed. Sandra would lie in bed wondering if they would make it through this crisis. Maybe they should just walk away from the property and start over. They were probably going to lose the condo anyway, why break up their marriage in the mean time?

One night Sandra decided to see if there was any help on the Internet. She ran across some loan modification specialists. She had heard there were a lot of loan modification scams. She didn’t want to lose the condo and get scammed out of even more money.

The more she looked into it, the more appealing it became. The government had issued regulations and loan modification laws to prevent people from getting hurt. Some states even required licensing so they could police it better.

There were some non-profit centers to help people understand what they would need to do. The problem was they were inundated with requests and really couldn’t give the personal attention Sandra was looking for. She and Jesse weren’t geniuses but they weren’t dumb either. She just didn’t feel comfortable negotiating with bankers for the biggest investment of their lives. Like you, she wanted to contact a professional loan modification specialist. She was worried what Jesse would say. He had been so argumentative lately, no matter what she said, he would take the opposite side.

One night she brought up the subject. Jesse stared into the TV like he wasn’t listening at all. Finally she told him she had gone ahead and contacted an online loan modification company. Jesse went ballistic. He screamed that it was all bullocks. She was wasting what little money they had. Now they would be broke and homeless.

Sandra was very calm. She let him rant and rave until he wore himself out. When he finally stopped, she handed him a printed sheet of paper. It had a step-by-step plan outlined. There was a list of forms they would have to fill out and requests for their tax returns, paystubs and credit card statements.

Sandra explained that the banks were now trying to keep people from losing their homes. They already had too many foreclosures, they didn’t want any more. She told him they would have to write a hardship letter detailing what had happened and how it wasn’t really their fault because Jesse’s wages had been cut. Most importantly, Sandra told Jesse they would have a professional represent them and do all the negotiating for them. The company she had contacted had saved hundreds of people’s homes and was currently getting 3 out of 4 loans successfully modified.

Do you think Sandra did the right thing to fill out a request for free information on the Internet?

Do you think they should just give up and lose their condo?

Are you in a similar situation as Sandra and Jesse? Are you close to losing your home and don’t know what to do? Are you and your spouse fighting more than ever because of the pressure?

There are a lot of loan modification companies out there. This has become a highly regulated industry. Everyone will give you a free consultation to explain why you should work with them and the cost of doing so. Its much less than you probably think.

If you are struggling to make your payments or have missed a couple completely, you need to do something now. Once you miss a payment the foreclosure clock starts ticking. If you wait too long, there is a point that there is nothing that can be done, you will lose your home.

Good luck making the right decisions to save your home!

House Bill 1672, which was proposed by Rep. Myra Crownover (R-Denton), would require doctors and other medical providers to provide disclosure forms to parents informing them of the storage process and allowing them to opt out. This bill passed through committee last month, but now another legislator wants to make some changes and put even more responsibility on those who are collecting the blood. Rep. Jodie Laubenberg (R-Parker) has filed an amendment requiring the Department of State Health Services to get written approval from parents or guardians to store samples. If this consent is not received, the medical facility must destroy the blood within sixty (60) days. The full Texas House will consider the bill, with its new amendment, during today’s session.

We have health law attorneys at Bertolino LLP who practice in the area of medical licensing and review before medical boards. Therefore, we make certain that we are aware of all possible changes to medical policies at the state and national levels. We will be following the decisions made here in Austin concerning the collection and storage of newborn blood so that we are ready to assist medical professionals who have questions or who are facing challenges related to any new law. Please contact our Austin, Houston, or San Antonio office if you are a doctor or other medical professional who needs legal assistance today. http://www.belolaw.com

If you’re a frequent borrower you become familiar with pay day loans. These types of loans are commonly advertised in televisions, radio stations and mostly on internet and even through emails. This has been the comfort zone for most borrowers who are in financial trouble for unexpected expenses and bills. For first time clients, you will be given the chance to obtain $300 on your first visit. An online application is provided by the company to cater all you financial worries. Once you have submitted and completed the form you will get the chance to borrow $ 1000. The amount they will grant you will depend on the strength of your paycheck. Once approved you get your $1000 direct deposited to your checking account on the following working day.

For first time borrowers you are fortunate enough to be granted a loan amount up to $1000. You don’t have to worry about those unforeseen and unexpected bills for pay day loan can lend you the amount you need to pay for urgent bills like car and house repairs, utility bills, overdue rentals and other financial worries. The company offers the best solution to your financial problem, thus helping you out to make ends meet. Certain requirements and criteria has to be followed and observe, you must present bank statement that you have an active savings or checking account, you must be at least 18 yrs. old, a legal citizen of USA. These are some requirements you have to meet for you to be an eligible borrower.

Since many individuals are now contemplating on pay day loans an option for their cash shortage, the company considers all possibilities to give the best service then can provide their clients. Their online site is a manifestation of their commitment to provide easy and fast access to payday loan. If you need to pay your bills on time and get out of a tight spot, then you should consider pay day loans service to assist you in your cash shortage.

Cash advance loan companies offers immediate cash for your emergency expenses or bills. The company only requires you to visit their site, fill up those online forms and submit it for loan processing. You have to indicate your current net take home pay, your recent address and phone number to contact you whenever your loan is approved and granted.

VA — Still a great program, designed for the veteran. It’s the one place a veteran can get a home loan up to $729,000 at a reasonable interest rate and 0% (that’s Zero Percent) down payment. There are no PMI charges required as there are on FHA and Conventional loans of more than 80%. There are less strict credit qualification standards for veterans and lower income requirements. The loans have no prepayment penalties. In Texas and a few other states, there are also veteran’s programs (that include National Guard and Army Reserve members) for purchases of land and homes with loans insured by the state. 

FHA — For the non-veteran, FHA is still the best, offering a 30 year fixed mortgage with a 3-1/2% down payment plus 1.75% PMI up front, or 5.25% total down. They allow the seller to absorb 6% of your closing costs and some prepaid items, so if you are a good negotiator, it’s possible to get into a home for no more than 5.25% of the sale price. FHA loan limits aren’t as high as VA but are still substantial at $289,000. They are a little more relaxed on credit requirements than on conventional loans. If you put a little more down, like 10%, you can avoid the up front 1.75% PMI charge.  They will also allow you to receive a gift of the cash involved from a blood relative, your employer and some charitable agencies.

FHA (k) — This is their new “streamlined” loan program. It has all the same basics of a regular FHA loan plus you can add up to $35,000 in home rehabilitation or remodeling costs to your loan as long as the work is completed with in 30 days. The maximum loan though is still $289,000 including the repairs and improvements. This program is great for buying damaged foreclosed homes.

CONVENTIONAL — There are way too many conventional loan programs to cover here, but if you have the time and can find a good independent loan broker, he will take your qualifying information and comb through the many programs offered and give you a synopsis of the ones that best suit your needs. I’ll be giving some tips on finding a good loan broker in a future article. 

INCENTIVES — Don’t forget about the tax credit. This is a credit for new home buyers (someone who hasn’t owned a home in 3 years). The incentive under the Bush package was $7500 tax credit for buying a home and it had to be paid back in payments over 7 years. Under the new stimulus program that was changed to $8,000 and you don’t have to pay it back. That means whatever you normally pay in taxes for the next year after you buy a home you get the first $8,000 of it back.

Don’t be discouraged by what you hear on the news, good loan programs are out there, and now is a very good time to buy a home.