California Real Estate Foreclosures Skyrocket

The rate of California real estate foreclosures has reached record numbers. This is largely fueled by adjustable rate mortgages that reset to higher rates, catching the homeowners off guard with a whopping mortgage payment. This same scenario has led to an increase in real estate foreclosures beyond California as well, but few states are suffering like the Golden State.

The worst part about is that many people don't realize there are ways to stop foreclosure in California (or anywhere else for that matter). In most cases, mortgage lenders do not want to foreclose any more than the homeowner wants it. The real estate foreclosure process in California is expensive and time-consuming for the lender, and the last thing they want is more foreclosed homes to deal with. They have to maintain the properties, auction them off, and (in many cases) manage them for months until they get a buyer.

This is where foreclosure avoidance comes into the picture. Lenders are usually willing to work with a borrower to find some kind of solution to their payment troubles. The types of "work out" programs vary from one lending institution to the next, but they all fall in one of two categories:

The California homeowner has only suffered a temporary financial setback, and would like to get caught up on the payments. In these cases, a real estate foreclosure can be avoided through repayment plans. Basically, the mortgage lender spreads the back payments over the future payments, to help the homeowner get caught up gradually over time.

In some cases, however, the borrower's financial problems are more serious. So if the homeowner simply cannot afford the payments anymore, the only way to avoid California real estate foreclosure is to sell the property. Some lenders will allow the homeowner to sell at a reduced process, in order to sell quickly. This is known as a short sale process.

Here's what you should take away from this article. There are ways to avoid a foreclosure process in California and elsewhere in the country. President-elect Obama has even been talking about a moratorium to halt future foreclosures for a certain period of time, in order to give struggling homeowners a chance to catch up. So if you have gotten behind on your payments, but you think you can get back on top of them, contact your lender to see what they can do.

Of course, the best thing to do is avoid a situation where California real estate foreclosure happens in the first place. You can do this by being a smart mortgage shopper, buying within your financial means, and choosing the right type of mortgage loan for your home buying situation.

Related articles:

• How to stop mortgage foreclosure from happening
• How much of a home loan can I afford?
• Which type of mortgage is best for me?

What is a Mortgage Amortization Schedule?

Article Summary: What is mortgage amortization and what does it mean to a home buyer / homeowner? This is actually an important topic that confuses a lot of people (including myself). So I asked Melissa, our resident mortgage guru, to explain what amortization is and why home buyers should understand it.

Let's start with a quick definition. Amortization is defined as the paydown of a liability, such as a mortgage loan, in regular monthly payments over a specified period of time. The monthly payments are divided between the principal and interest of the loan.

As a part of the mortgage loan process, your lender will provide you with an amortization schedule that shows you the breakdown of your monthly payments -- how much goes to pay the interest, and how much will pay down the principal and the remaining balance until the loan is paid off. This schedule can be provided in a monthly or annual format.

As a home buyer, there are some things you need to understand about the amortization calculation or schedule you are given:

What to Know About Your Amortization Schedule

First, you want to make sure the lender has not sold you a negative amortization loan. This means that your monthly payment does not cover both principal and interest, so there would be a remaining balance at the end of your mortgage loan term. If the payment is not enough to cover the full amount of interest due as well as the principal for each month, the remaining unpaid interest amount would be added on to the balance of the loan, again resulting in a balance at the end of your loan term.

This was a common practice during the recent real estate boom of the 1990s, because many borrowers were initially unable to qualify for or afford the full payment amount on the size of loan they wanted. So the mortgage loans were structured to adjust that payment amount at a later date. This could present a real problem to a borrower if the negative amortization schedule was not fully disclosed, because at some point the loan payment is going to adjust in order to "correct" itself -- and this could mean a significant increase in the size of the payment.

You also want to make sure the term (or length) of the mortgage loan coincides with the amortization schedule you are given. For example, your loan payment is calculated or amortized over a 30 year term, but your lender has put you into a 7-year mortgage product. What this means to you is that, at the end of the 7-year loan term, the full remaining balance would be due! This is commonly referred to as a balloon loan. The previous scenario comes into play again in this situation. It spreads the payments out over a longer term, thereby making them more affordable, with the hopes that the homeowner will sell or refinance before those seven years are up.

No doubt, this can be a confusing subject. That's why it helps to have a visual aid (the mortgage amortization schedule / table) as well as someone who can explain it to you. At the same time, it's critical that you do understand this concept, so that you don't face any unpleasant surprises several years into the life of your loan.

Related blog posts:

• How much can I afford to borrow?
  
• How to apply for a home loan
  

The Closing Costs to Refinance a Home

It's important to consider closing costs before you try to refinance your home loan, because the cost of refinancing might outweigh the benefits. We've posted a new article on this subject to help you understand the costs associated with a refinance loan.

A lot of homeowners in the U.S. are trying to refinance their homes right now. Many are trying to escape the uncertainty of their ARM loans as a result of what they've seen on the news. Others simply want to take advantage of better credit scores and/or lower interest rates to save money on the new loan.

Regardless of your reasons for pursuing a refinance loan, you need to figure out how much it's going to cost you. This will help you determine your "break-even point," which is one of the most important concepts of mortgage refinancing. Simply stated, if you pay more in closing costs to refinance your home than what you will save over the term of the new loan ... then it doesn't make sense to go forward with it.

Of course, the reverse is also true. If you get a much lower interest rate on the new loan, and you keep it for many years, the money you save could very well offset the cost of closing on the new mortgage.

Have I confused you? If so, you really need to read the new article we have posted on this subject. Don't trust a lender to tell you when it makes sense to do a refi ... find out for yourself. You can do this by determining the cost of refinancing and then using that number to calculate your break-even point.

Get a Free Homeowners Insurance Quote Online

I am a self-admitted real estate geek, and also an Internet geek. So when I see a company who combines the best of both worlds, I just have to share it with others. Today, I want to explain how you can get free online quotes for homeowners insurance from big-name providers like Farmers and Nationwide ... without having to make a single phone call.

If you'd like to skip this overview and get a free quote online right now, you can do so from the insurance page of our main website. Otherwise, keep reading and I'll tell you why I like this website so much.

There is a website / company called Insure Me that makes the process of collecting homeowners insurance quotes faster and easier than ever before. They've put the entire process online and made it free for everyone. All you have to do is visit their website and fill out a short form with very basic information (name, zip code, type of insurance you need, etc.). Then you'll hear back from local insurance agents in your area, agents who work for well known companies like Nationwide, Unitrin and Farmers.

You can then compare the homeowners insurance policies and quotes provided in order to choose the one that best fits your needs. And the best part is that you don't have to spend half a day making phone calls -- you just submit a request online and the agents bring the information to you.

Get Insurance Quotes Online Today

If you are buying a home, you will need an insurance policy before the mortgage lender will allow you to close the deal. In most cases, you actually have to bring your proof of coverage to the real estate closing, and you have to be covered for at least a year.

This is why it's so important to get homeowners insurance quotes early on in the home process. It will help you keep the process moving forward, and it will prevent unnecessary delays. Combine this necessity with the convenience of getting free online quotes through the Internet, and you can see the value of a website like InsureMe.com.

Don't put the process off any longer. Start getting homeowners insurance quotes today so you can begin comparing policies. It will help ensure a smooth home buying process. Click here to begin.

How to Stop Mortgage Foreclosure - Yes, You Have Options

Right now, thousands of homeowners in this country are researching ways to stop mortgage foreclosure. For one reason or another, these homeowners have fallen behind on their mortgage payments. Many can no longer afford to make their payments each month. Many of these homeowners are all asking the question: How can I stop a mortgage foreclosure from happening?

In this article, we will look at some of the ways you can avoid having your home foreclosed on. It's an important topic for a lot of homeowners, so we will do our best to cover the bases here.

Most homeowners don't even realize they have options available to either (A) get caught up on their payments or (B) sell the home before the bank forecloses it. In fact, those are two primary paths we will discuss in this article. When discussing how to stop a mortgage foreclosure from taking place, all of the techniques fall under two categories:

• Category 1 -- Techniques to help you get caught up on your mortgage payments, and thus avoid being foreclosed on.
• Category 2 -- Techniques to help you sell the home in lieu of foreclosure.

Let's start by covering category 1, the "workout" options that are available to homeowners. Most lenders will try to avoid foreclosing on a home, if at all possible. The process can be time-consuming and expensive for the bank. They have to go through a legal process that can take months, maintain the property in the meantime, sell it through an auction, etc. All the while, they have a non-performing loan on the books that is costing them money.

So whenever somebody emails me asking how to stop foreclosure on their home, my first question is always the same: "Have you spoken to your lender about it? Have you asked about workout options to get back on track with your payments?"

Of course, this assumes that the homeowner has only suffered a temporary financial setback, and that he or she feels confident that they can get back on track with their payments. In this type of scenario, many lenders will offer the borrower what they collectively refer to as "workout options" -- ways of getting caught up on the past-due payments.

In most cases, lenders will offer one of two ways to get caught up on past-due mortgage payments. The first option is to pay the owed amount as a single lump-sum payment. This option is known as reinstatement. Because a lot of homeowners cannot afford this option, most lenders offer a second option through which you amount owed is spread out over the future payments. This is the gradual, more affordable approach, and it's usually referred to as a repayment plan.

Both of these methods -- reinstatement and repayment -- can help you stop mortgage foreclosure from happening by getting caught up with your missed payments. Ask your lender what kind of options they offer.

But what if you simply cannot afford the payments anymore, and you don't foresee that changing in the future? In this case, your best option might be selling the home before the bank forecloses on it. In fact, many lenders will allow homeowners to sell for a reduced price (below market value) in order to make a quick sale. This is known as the short sale technique and it's worth considering as well.

How you stop mortgage foreclosure on your home will depend on the financial situation you are in. The main thing is to do everything you can to avoid being foreclosed on, because it will damage your credit and make future homeownership difficult.

How Much Mortgage Can I Afford to Borrow?

How much of a mortgage can I afford by borrow when buying a home? It's a common question among first-time home buyers, and for good reason. Take out more of a mortgage loan than you can afford to pay, and you could become another foreclosure statistic. And that's bad for all parties involved -- for you, the bank, and even the economy.

So in this article I'd like to talk about the key concepts of mortgage affordability and the process of determining how much you afford to pay.

Lenders Cannot Tell You What You Can Afford

Many home buyers wrongfully assume that a mortgage lender will only approve you for a loan amount that you can afford to pay. But this is not always the case. The lending industry is driven by profits -- they are not in the business of looking out for consumers. You are the only one who can determine the affordability of a certain size mortgage payment.

"But a lender wouldn't let me borrow more than I can afford ... they would lose out too, right?" This is a common argument, but it's also a flawed way of looking at this subject. In this country, there is a secondary mortgage market. I won't go into the financial weeds on this, but it basically gives lenders a way to sell off their mortgage loans soon after they grant them. And to a certain extent, it makes them less concerned about what you can truly afford to borrow (because they can sell of the risk associated with the loan).

We are seeing this happen right now, in staggering numbers all across the United States. Lenders gave people mortgage loans that they could not possibly afford, but they "eased" them into the loan with a low initial interest rate and (often) downplayed the risk of a future rate increase. You know the rest. The mortgages reset to higher interest rates, and millions of Americans found themselves unable to afford their mortgage payments. Then came the foreclosure crisis ... the housing crisis ... and, now, a full-scale economic crisis.

I believe I've made my first point. You are the only person who can determine what kind of mortgage you can afford to borrow and pay back. The only thing a lender can tell you is the amount they'll qualify and approve you for -- not the amount you can realistically afford.

So, How Much of a Mortgage Can You Handle?

Assuming I've convinced you that this is entirely your decision, we can move on to the next logical question. How do you determine how much of a mortgage you can afford to borrow?

The first step is to determine your home buying budget. By this, I mean the amount of money you could afford to put toward a mortgage payment every month, after all of your other monthly expenses have been covered. So start by adding up your monthly expenses -- car payment, credit card payments, food, gas, savings, etc. You can leave your rent off, because that payment will disappear when you buy a house (hooray!).

Next, you can take a hypothetical sale price for a home (or better yet, the actual sale price for a home you're interested in) and put it into a mortgage calculator. You can find these calculators online, and most of them are free to use. These tools will ask you for several pieces of data -- (A) the principal amount you need to borrow, (B) the interest rate, (C) the length or term of the loan, and (D) the property taxes. Some of these items are optional, such as the tax and interest amounts. But you'll get more accurate results by entering as much information as possible.

The more advanced calculators will let you enter your income as well, which is even more useful in determining how much you can afford to borrow. You can find these kinds of tools at Interest.com and a few other places.

When you run the numbers, you'll have a better idea of how much mortgage you can afford to borrow, because you'll have an estimate of your monthly payment based on the principal amount you're going to borrow. Compare that number to the amount of money you can afford to pay each month (after your other expenses), and you'll be honing in on your mortgage affordability level.

Keep in mind that the interest rate the lender gives you will have a lot to do with your monthly mortgage payments. So until you know what kind of rate you qualify for, you'll have to use the default setting for interest rate on the mortgage calculator. If you do have all the pieces of the puzzle (the principal, the property tax amount, the interest rate, etc.), you'll get a fairly accurate idea of what you can expect to pay each month for a certain mortgage amount.

Related blog posts:

• Which mortgage type is right for me?
• How to apply for a home loan
• What is a mortgage amortization schedule?
  

How to Find the Best Real Estate Agent for Your Needs

Want to skip the article and start searching for an agent right away? Start here: Find a Top Real Estate Agent to Buy a Home


When you consider what a real estate agent will do for you during your home buying or selling experience -- and when you consider the amount of money on the line -- it only makes sense to find the best real estate agent for your particular needs.

The question may people have is not "why," but how do I find the best agent for me? I'll give you some tips on that in just a moment. But first, I want to assign a definition to the word "best," which is just an empty superlative without a definition behind it.

What makes a real estate agent the best one for you? For starters, it depends on whether you are buying or selling a home. Some agents help buyers and sellers alike, while others specialize in one area. My advice is to find one who specializes in either the home buying or selling process, whichever is applicable to your situation.

For example, if you are planning to sell your house, you don't want an agent who spends most of his or her time helping buyers. In this scenario, the best real estate agent for you would be one with a long history of helping sellers.

And speaking of experience, this is the next thing you need to consider when choosing an agent. Most will publish their skills, training and experience onto their websites, which gives you a quick and easy way to size them up. I recommend you skip over the fluff messaging about "quality and integrity" and zero in on their accomplishments. For example:

• If the agent primarily helps sellers, how many has he or she helped over the years? What is the average selling time when she represents a client? Does she have a history of selling at or above market value?
• If the real estate agent helps mostly buyers, how many has she helped? What have those clients had to say about her, in terms of testimonials? How well does she know there area where you want to live (schools, neighborhoods, etc.)?

Now let's talk about some of the ways you can find the best agent for your particular needs. These days, thanks to the Internet, finding a real estate professional is easier than ever. Here are some of the things you can, both online and off:

5 Ways to Find a Real Estate Agent

• I recommend you start the process by seeking referrals from family members or friends. Who better to recommend an agent than the people you know and trust? Often, you don't need to look any further than your own "circle" to find the best real estate professional for your needs.
• If you have a preference for a certain real estate company (like one of the big national names), you could start with their website and look for agents in your area.
• I'm a big fan of reading the blogs of local real estate agents, as way of judging their intelligence, personality and professional skill. You can easily find the blogs of realty professionals in your area just by doing a Google search and sifting through the results. For example, here in Austin I would do a search for the phrase "Austin real estate blogs." I got a ton of results when I searched this, by the way.
• You could use one of the big Realtor search websites, such as Home Gain. It's a free and easy way to get matched up with local Realtors in your neighborhood. Start here: Check Commission Rates in Your Neighborhood
  
  

I hope this guide to finding the best agent has give you some useful ideas, and I wish you all the best in your future real estate endeavors.