There is no better time than the present for homeowners to examine the situation that they are in today. Whether you are selling your home or not you should review the details of your present mortgage(s). I have found that many homeowners do not have a clear idea of the specifics of their own mortgages.
Here are some of the questions you should be asking yourself: What is my rate and when will it be changing? What will my payments increase to when my rate changes? If your loan has an ‘interest-only’ minimum payment period, when will that period come to an end and what will my payments increase to at that point? Do I have a pre-payment penalty and, if so, how much is it and when does it phase out?
Those who have an adjustable rate mortgage with the potential for negative amortization need to have a clear understanding of its terms and pay special attention to upcoming payment changes. If your mortgage balance has been increasing because you have just been making the minimum payment, when will your loan recast and what will your payments increase to at that point? If in doubt of exactly what your note says, seek the advice of a seasoned mortgage professional to help you understand your current mortgage.
Today, more than ever, homeowners who are planning on selling their homes need to be realistic about their timeframe for moving. The combination of a record number of homes listed for sale and a tightening of lender’s underwriting guidelines is slowing home sales and forcing sellers to make some tough decisions.
Sellers must clearly understand the fine print in their mortgages. Those who need to sell because their payments are going to be adjusting beyond the affordability range cannot afford the luxury of waiting until a buyer comes along to give them the price that their home was worth last year or the year before, when property values were stronger. Sellers are well advised to put the importance of protecting their credit over protecting their equity because if they fail to sell their homes in time both their credit and equity could suffer. The government is not likely to come up with a bail-out program in time for homeowners who are in trouble now.
Besides being practical about the asking price (and ‘staging’ their home), sellers can help themselves by offering to pay up to 6 percent of the sales price in buyer’s closing costs. This can be an effective way of permanently lowering the buyers’ interest rate and their payments. Sellers can also offer to loan their buyers money by providing a second mortgage. For example, a buyer with 10 percent down may obtain an 80 percent conventional mortgage and combine it with a 10 percent mortgage from the seller. This kind of arrangement will work in certain situations and can make it easier for buyers to buy their home.
The good news is that rates are good, homes are selling and there are plenty of qualified buyers who want to live in Santa Cruz County who are looking for good
deals.
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Presented on behalf of Brent Dunton
Certified Mortgage Planner, Santa Cruz Home Finance
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