Ask The Underwriter at 2rHouse.org

Foreclosure is the big word in the news. Maybe sub-prime is in the first spot, but most of you aren’t wondering whether you’re sub-prime or not. You’re wondering what happens if you fall into foreclosure.

The news media is making sure you know that there are plenty of people in the same boat. So maybe you won’t lose sleep wondering how you’ll explain your situation to your friends and family. But you might want to consider what you’ll need when you come out on the “other side”.

One of these days, there will be underwriters who want to approve loans again. Will your home loan of the future be one of them? Will you be able to prove that you were caught in the nightmare that was ForeclosureVille 2007?

In a few years, underwriters will be trying to follow guidelines about approving people who have been in foreclosure in the last 10 years. That might be you. Here’s what that underwriter is going to want to document in that file:

• You got caught by the “big bad wolf” of sub-prime lending and lost your home
• Before that, you were a “good guy” who paid your bills on time
• You understand the importance of paying your bills on time and you just couldn’t keep up with the spiraling payments as your mortgage adjusted upwards
• It could happen to anyone (like you) and it did

How in the heck do you prove that? Memories are not only short, but they are very plastic. Underwriters will be thinking whatever the guidelines tell them to think when the time comes to loan mortgage money again to people with spotty credit and foreclosures in their history.

My advice is to assemble and KEEP all the evidence that will help prove what happened. Yes, I know it’s in all the newspapers today, but in three or four years will you be able to prove you paid your bills on time in 2006? What about 2005? We all know you crashed and burned in 2007, but if you can prove you were stable before then, it will really help, believe me. I’ve looked at those files in the past and was able to plead my case and my reasoning to the powers-that-be. I was able to point to a good credit history prior to the “incident”, which in this case is your upcoming or recent foreclosure.

If possible, pull a credit report on yourself, complete with credit scores if you can. Even if the recent months SUCK, the history of the last two years should be there and you can file it away for future reference in your explanation.

I would start keeping a notebook or a diary – something you can file easily, but make notes about conversations with lenders, increases in your payment, the increasingly large amount of cash required to stop the action and save your house. This documentation will become very valuable in the future when you’re trying to convince a mortgage underwriter that you DO understand the importance of financial responsibility.

It’s possible that your careful records will be just the thing that convinces that conservative underwriter that you deserve another chance.

Update: July 17, 2009: This site is no longer there; sorry for the inconvenience.

I took a look at a fairly new site the other day. It was one of those friend of a friend type things and so I wasn’t expecting it to be anything more than a possible blogroll link. But as I worked my way around the site I discovered that this guy is not only experienced in his subject matter, which is financial planning for ordinary people like us, but he writes in a easy-to-understand manner.

There were a couple of things that came together to remind me that this friend lives and works in Canada. Some of the financial documents mentioned were noted by their Canadian names (I think). But the information is clear and I signed up for the newsletter, expecting that the advice I get on a regular basis might help us with our daily budgeting as well as our long-term investing concerns.

There’s no question that the economy is suddenly changing, but to what? Inflation? Recession? Doom and gloom? I personally feel that anyone who wants to learn the basics and can pay attention to trends, cycles and the predictable flurry of media nonsense can keep their money mostly intact and grow their savings to reflect their own goals.

I don’t know if you have room for another newsletter in your life, but this Free Financial Advice one is probably going to be more valuable to you in the long run than most things you sign for today.

Here’s the link: Free Financial Advice

The most recent upgrade promises to add some exciting functionalilty to this site. It appears to have gone without a hitch, but if you encounter problems, please contact me and let me know exactly what you experienced and what you were trying to find.

I hope you like the new look as much as I do.   Here’s what’s new besides the look:

Mortgage rates are now available on the site.  You’ll find the overnight average for almost every kind of mortgage loan program out there, provided by Bankrate.  Here’s the link:

Current mortgage rates 

Home equity line of credit rates are on the same page, featured right below the first mortgage rates.

We’ve also added mortgage loan calculators to this site so you can figure out the monthly payment for the loan amount you’re considering.  There are first mortgage calculators and home equity loan calculators right under the first.

Mortgage loan calculators 

The other change you’ll notice is that the blog has been moved over to make room for better navigation through the articles.  There are still many articles left to move into the directory, so if you don’t see what you’re looking for, it’s probably still buried here in the blog.  Just do a quick search.  We’ll get those additional articles moved in a few days.

In the meantime, you can return to the main index here:

Home 

During the next few days, the site will be going through an upgrade. I hope that everything goes smoothly, but leave an apology here in advance just in case. Hopefully all the kinks will be worked out by Monday and you could see some real improvement in looks and functionality long before that.

Thank you for your patience. Please bookmark the site and come back soon.

It’s a pretty quiet time of year for housing starts and new home purchases. It still happens in December for sure, but May and November are usually the peaks and December is definately a slower pace than the rest of the year. If you’re a buyer, it might be a good time to find a bargain.

January is the time if you’re a seller. Buyers begin the search in earnest as the year turns and while they may not actually be knocking on your door yet, they are thinking about it. Take the time to plan minor fix-ups and improvements that will improve your curb appeal. Clear the clutter inside and make your space seem bigger and more inviting.

Buyers: this is a good time to work on improving your credit score. It’s possible to raise your score 20-50 points in a few months. January is when the good appliance sales and home furnishings are at their lowest prices. If your FICO score gets you higher rates, you’re not making progress, are you?
Start working on your credit now and by late spring, you could see enough improvement to get into a home.

Above all else, pull your family around and enjoy the winter Holiday season. Merry Christmas, Happy Holidays, and a blessed New Year to all of you.