Forclosures On The Rise

If you have been looking at the news the past few months, I am sure you have heard about the difficulties in the mortgage and real estate industry. There are a lot of homeowners that are facing foreclosure. The reason that most people are facing foreclosure is because of the type of mortgage that they have in particular the Adjustable Rate Mortgage (ARM). Many homeowners purchased their home two to five years ago using the adjustable rate mortgage, and now that interest rate is adjusting up. If you remember, I talked about adjustable rate mortgages in an earlier issue of The EDJe-ucator. The increase in the interest rate causes the mortgage payments to increase which makes it difficult for the homeowner to make their monthly payments. An adjustable rate mortgage can be a budget buster, and I know that you have been sticking with your budget.


If you are a homeowner, my advice would be for you to make sure you know what type of mortgage you have, i.e. a fixed rate mortgage or an adjustable rate mortgage. If you are in the market and looking to purchase a new home, make sure you know the difference between an adjustable rate and fixed rate mortgage. If you know of anyone with an ARM that it is getting ready to adjust, have them to give me a call at 1-877-469-3353 or 832-647-1769. I am sure it is in their best interest that they refinance to a fix rate mortgage. If the homeowner is unable to refinance and is having difficulty making their mortgage payment, he/she should contact their current mortgage company and try to set up a payment plan. This might hurt your credit scores, but at least you will not lose your home. Banks and mortgage companies really don't want to foreclose on your house because the foreclosure process can be very expensive and sometimes they actually lose money. Banks and mortgage companies are not in the business of foreclosing on houses and trying to re-sell them. They are in the business of lending money. If you contact your bank or mortgage company, sometimes they are willing to work out an agreement with you.


For the record, I am not totally against adjustable rate mortgages. There are a couple of occasions I will recommend an adjustable rate mortgage to a client. The first occasion is if the borrower knows that they are not going to occupy the house for a long period of time. In this case, the borrower can take advantage of the lower interest rate of the adjustable rate mortgage, and sell the house before the interest rate adjusts. The second occasion is only for "discipline" borrowers. In this case, maybe your credit is not strong as it should be. I might recommend that the borrower consider an adjustable rate mortgage and take advantage of the lower interest rate. While on the adjustable rate mortgage, the borrower must work on their credit to improve the scores and never be late on their mortgage. Before the interest rate adjusts, the borrower can refinance to a fix rate mortgage.


Thank you for reading The EDJe-ucator. If you have any questions or referrals, call 1-877-469-3353 or 832-647-1769 email donte@RealEstateByEDJ.com.