Q & A with Dottie Herman

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Q1 - My husband and I have been in our house for 1 year. We are currently going through a little financial trouble as we had some unexpected expenses. If we miss one or two months on our mortgage is that grounds for foreclosure? Is there anything we can do so we remain in good standing with our lender?

A - Check with an attorney, but Lenders can can usually start a foreclosure proceeding once you are 90 days late, but some will wait longer.  If you miss a payment you will most likely get a call from the bank asking why you missed the payment, and if you will continue to have a problem paying each month.  Know that once you are late your credit is negatively impacted and is reported to credit agencies. The proper approach for you is to be honest and explain your situation to the bank.  Banks do not want to foreclosure on your home so the first step is called "Loss Mitigation", meaning how they can work out a solution that will keep you in the house and get caught up with your payments. First they may give you some "Forbearance" agreement, meaning they will provideed temporary relief in some form., Aafter that they may agree to modify your loan to make it affordable for you by lowering the debt or forgiving some part of the obligation.  Keep in mind that no bank will generally offer this unless you can prove that you have a true hardship or imminent hardship, meaning that recent events like losse of employment or hHealth issues.  You may want towill discuss with the lender if you will sell your home to reduce your monthly expenses?  Your lender may make this part of any agreement to help you, and may even allow you to sell if your mortgage loan balance is higher than the value of your home.  This is known as a short sale, and in today's environment manymost banks will relieve you of any obligation for the remaining balance after the sale.  So, if you will not be able to meet your obligation, its ist best to communicate with your lender and hopefully get back on your feet as soon as possible.  Good Luck!

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Q2 - I own a townhome and I need to take a second mortgage. How do I go about this? How will my payments change? Are they combined or do I pay off one mortgage and then the other?

A - Obtaining a second mortgage from a lender is very similar to getting your primary mortgage. It is its own loan with its own payment each month. These loans are normally not available in terms longer that 15 years and may have a fixed rate and payments for the entire term of the loan, or can be an Equity Line of credit that hasve a variable interest rate and allows you to borrower and pay back monies over and over.  If you intend to use all the money and plan to pay it back over longer periods of time then you should also consider a refinance of your current mortgage and increase the amount of the new loan provided with the amount you need.  If the current interest rates are lower than the one on your mortgage it may be less expensive than a second mortgage and allow you to lock in a lower rate and payment.  Speak with a mortgage specialistlender who can review your scenario and provided the options available to you.  Numbers do not lie, so it should be clear which is most beneficial to you.

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Q3 - My current rate is not much higher then what is currently available, however, it will make a decent difference in my monthly payment. Is there a way to refinance without many costs involved? If not, how do I know if it makes sense financially?

A - The first thing you need to decide is what is your priority?  Do you need to lower your payment? Then determine if the cost makes sense to get it done. In many cases you can refinance and lower your payment while including the closing fees in the new loan by increasing your mortgage slightly.  Closing fees vary by state, and even town, so you need to explore what the cost would be in your area.  Many lenders will also allow you to increase the rate in exchange for lower closing costs.  But unless your rate is significantly lower this may not work for you.  The bottom line test is to take the total cost of refinancing, divide it by the monthly savings to determine how long it will take for you to recover the cost and actually begin saving monies.  Again, if your priority is to lower your payment you will have to be willing to accept a longer payback period.  Contact a lender and ask them to calculate the cost and payments for you so you can make the best decision.

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Q4 - How soon after purchasing a home can I get a home equity loan? Is there a certain amount of time that needs to pass?

A - There is not normally a wait period and many times a lender will provide a home equity loan the day you buy your house and receive your first mortgage.

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Q5 - I filed for bankruptcy 10 years ago- my family and I have rented and moved around a lot in the past 10 years. I finally want to buy another home. Will I have a problem because of the bankruptcy years ago? 

A - You should be fine after ten years as long as the following has also occurred:.  You have been released from the bankruptcy for more than 2 years, have reestablished more than 3 new credit accounts, and paid on time, creating a high credit score. If all of this is in order, speak to mortgage lender and get prequalified for a loan!  Good luck!

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If you have a real estate question for Dottie, please send it to; Dottie@RealEstateChannel.com

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