Q & A with Dottie Herman

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Q1 - My taxes increased and I am now having trouble paying my mortgage as the payments were difficult to begin with. What can I do? I don't want to default on my mortgage, and I can pay most of it, but I don't know what to do about the other few hundred dollars each month.

A - You could ask your lender for a Loan Modification, whereby the lender  might reduce your interest rate and monthly mortgage payment, to make up for the increase in your real estate taxes.  You would have to qualify, however, by proving a financial hardship. 

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Q2 - Is seller-financing a perk to home buyers?

A - In most cases it is.  With seller-financing, a buyer can usually get a below market interest rate, and would not have to pay any bank closing costs.  The down side is that the buyer would not have a mortgage payment rating history on his/her credit report going forward.

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Q3 - My home is for sale. We recently went to contract and the buyers have a mortgage, however, they need a little more money. If I offer them a second mortgage, as the seller, how does that work? Do I have any recourse if they default?

A - The buyers' lender will most likely have to include the monthly payments for the second mortgage in their debt to income ratio whena qualifying them for a loan.  If approved, your risk is that your loan to them is in second lien position behind the lender's first mortgage.  If they're paying their first but not your second, you may be able to place a judgment or lien against their home.  You should speak to a real estate attorney about any recourse.

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Q4 - How do I go about applying for a second mortgage on my property? Are there certain requirements?

A - To apply for a second mortgage, you have to make sure that you have enough equity in your home (most banks want a minimum of 30% equity to be left in the home after closing on the second mortgage).  You will also have to document your income and assets just like a first mortgage.  The underwriting criteria are a bit stricter for the second mortgage, as the loan will be in second lien position, and therefore a higher risk for the lender. 

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

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