(VMS Source)In the beginning, a mortgage was just a conveyance of land for a fee. The buyer paid the seller a set rate, with no interest, and the seller would sign over the land to the buyer. There were usually conditions that had to be met before the land would be the property of the buyer, just like today, but usually it was based upon the assumption that the land would produce the money to pay back the seller. So, a mortgage was written due to this fact, and the mortgage stayed in effect no matter if the land produced or not.

But this old arrangement was very lopsided in that the seller of the property, or the lender who was holding the deed to the land, had absolute power over it and could do whatever they liked, which included selling it, not allowing payment, refusing payoff, and other issues which caused major problems for the buyer, who held no ground at all. With time, and blatant abuse of the mortgage system, the courts began to uphold more of the buyer's rights so that they had more to stand on when it came to owning their land. Eventually, they were allowed to demand the deed be free and clear upon the payoff of the property. There were still steps taken to ensure that the seller still had enough rights to keep their interest safe and make sure that their money was paid.

In the U.S., some states have created their own version of the mortgage, which is why they are referred to as ́lien statesî. In England and Wales, the Law of Property Act of 1925 created a close parallel to the U.S.'s stance on mortgages. In 1934, mortgages began to be widely used again in the U.S., and the Federal Housing Administration helped to lower the down payments on homes to make it easier for buyers to purchase a home. During that time, around 40% of people in the United Sates owned homes. Now, that number is closer to 70%, due to the lower interest rates.

Although mortgages today have evolved into many different forms, they are still basically the same essential contract that they were in the beginning. Now, there are many more laws and regulations to help protect the buyer, seller, and creditor. There are also many different ways to lock in a low interest rate, you just need to talk to your mortgage broker about what the rates are now and what kinds of programs they offer to keep those interest rates low throughout the life of your loan.

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Strategies To Lower Your Mortgage Payment

You have a couple of options to lower your mortgage payment when refinancing. The first choice is to find a low rate mortgage. So even if you choose the same length for your loan, you will still see a savings in your monthly mortgage bill. Adjustable rate and interest only loans will give you the lowest payments, at least at the beginning of your home loan. But a fixed rate loan can also give you reasonable rates with security that they won't rise in the future.

The other option is to extend your loan term, especially in the case of your second mortgage which usually is for five to ten years. By consolidating your loans to a thirty year loan, you lengthen your payment schedule for principal, so you have a smaller payment. However, your interest rate and charges will be higher than with a shorter term.

Getting The Best Loan

Once you determine the type of loan and terms you want, do your shopping for a good lender to save even more money. Lenders will vary in how much they charge for closing costs and interest rates. The APR will tell you how loans compare overall, both in terms of rates and closing costs.

But if you are planning to move or refinance again in the future, then be wary of paying high closing costs. Even if they secure you a lower rate, you will only see a savings if you keep the mortgage for several years.

Don't base your lender decision based on posted loan rates. Ask for a personalized loan quote based on your general information. With more accurate numbers, you can make an informed choice as to who has the best financing for you.

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When it comes time for you to acquire a home mortgage for your first home or for a second home, or perhaps you are just looking to refinance. Whatever the case may be, it is important to shop around for a home mortgage.

There are many places these days to track down a home mortgage, the easiest being the internet. If you are a person with a good salary and excellent credit looking for a standard home mortgage, you shouldn't have much trouble tracking one down. It would be as easy as walking into your local bank branch and asking the branch manager to set up an appointment with someone in their mortgage department.

On the other hand, if you are a person whose credit is a little bit challenged, tracking down a home mortgage may prove to be a little bit more challenging. This is where the internet comes into play. There is a wealth of information to be found and people to help you achieve your dream of obtaining a home mortgage. The people that are capable of helping you if your credit is damaged or challenged are called mortgage brokers.

Mortgage brokers are not actual lenders. Their job is to shop around for a mortgage for you. Mortgage brokers easily have access to hundreds of wholesale lenders who lend to people with credit issues and unique situations. So, if your situation is unique, or you have credit issues, a broker may be ideal for you.

If your situation is unique, or your credit is challenged, it is still important to shop around for a home mortgage. By shopping around you will be doing yourself a huge favor, and you could possibly save yourself a bundle of money in closing costs and interest fees.

Allow for up to four brokers or loan officers to assess your situation, then wait for them to come back at you with an offer. The one that offers you the best deal within reason, should be the one you give most of your consideration to. Good luck.

(VMS Source) It is becoming increasingly popular to use a mortgage in lieu of a low-interest savings account. Is this a good idea?

The latest version is a home-equity line of credit that is used to buy a home. It is marketed as a way to pay down your mortgage faster than the traditional mortgage. But it only works at this if you use it correctly. It could be both good and bad that you can use the funds from the account whenever you want to. All you have to do is write a check.

It is basically an adjustable-rate home-equity credit line that is based on the value of the property. You make interest-only payments for the first 10 years. The balance is then fully amortized over the next 20 years. You will pay both the interest and the principal at this time.

If you go ahead and own the home for ten years, you could be facing amazing monthly payments. Your monthly payment could more than double on you. Yet, there is no negative amortization on this loan program. The interest is capped for five years and high-credit score borrowers are currently looking at a cap of 8% over the starting rate. In today's world, the maximum the interest rate could hit is in the 14% range. Yet, after five years, the cap could revert to either 21% of the state's usury.

This plan could work well for the dedicated purchaser who puts all extra money and bonuses into the mortgage account as payment on the balance. The interest is then lowered and the loan is paid off much faster. Most borrowers must have a score of over 660 to be approved.

Many advisors suggest the use of a 30-year fixed-rate mortgage with interest-only payments for the first ten years instead. Yes, the payment will go up after the inital ten years, but the interest rate won't. The concern against the equity-line to purchase is that borrowers would simply write checks without thinking about the addition to their mortgage balance. Plus, the interest rate is adjustable -- always a risk.

If you are considering an alternative loan program for the purchase of your home it is important that you sit down and do all of the necessary math. For example, you should calculate how high the payment could go due to rising interest rates on an adjustable rate mortgage. You should be able to afford the worst. If you can't, you probably should look to a less expensive home.

If you only plan on living in a home for three to five years, a loan in which the interest is fixed for five years is perfect for you. You get the lower rate, but you have to be sure that you are going to want to move in the time period. It still remains that the best long-term bet for a mortgage is the 15-year fixed rate mortgage. You pay less interest and build equity faster.

Other new trends to watch for in the marketplace include mortgages that can be automatically converted into reverse mortgages and longer fixed-rate term mortgages.

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(VMS Source) If you are looking for a mortgage refinance, it never hurts to shop around for the best rate and deal. Shopping around could mean the difference between paying or saving thousands of dollars in closing costs, and interest fees?.

If time happens to be on your side, and you don?t need to refinance your mortgage immediately, take some time to educate yourself about the mortgage industry.

By educating yourself about the mortgage industry, you are essentially putting yourself into the driver?s seat.

There is so much mortgage jargon, terms, and definitions that will be thrown at you when considering a mortgage refinance, that it is impossible for any one person to understand everything.

It is not necessary to become an expert in the mortgage industry. You just need to have somewhat of an understanding. This way, while you are shopping around for a mortgage refinance, your decision on which lender you want to work with, will be all the more educated.

The mortgage industry is a very competitive one, so by shopping around, and making it clear that you are shopping around to the lenders or brokers you are dealing with, they will be forced to come back at you with the best deal possible. They know that they are competing with other mortgage companies, and they will not want anyone else to get your business, so they will offer you the best rate available to them in order to keep your business.

Keep in mind when a loan officer or broker offers you a deal that sounds too good to be true, it just may be, so be careful. You don?t want to get to the closing table only to find out you are not getting what you thought you were getting.

Remember, before you commit to a lender, ask for everything they told you to be sent to you in writing, this way you won?t have any surprises at the table.

This is why it is so important to educate yourself about the mortgage industry.

With just a fair amount of knowledge, you will have a general understanding of what you are being offered, and you will be able to determine whether or not the deal is reasonable.

My suggestion to you would be to allow for up to four loan officers or brokers to assess your situation. Whichever one comes back with the best, and most reasonable deal, should be the one for you to consider.

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Home mortgage refinancing can be a sound financial move for any homebuyer, most especially if the interest rates are ideal. You can save a lot on your monthly payment, and you can swiftly ease your way back to regain financial control.

Factors to Consider Before Refinancing

When you refinance, it is just as important to consider other factors related to your mortgage. You do not only look into the interest rate, but make sure you consider the following as well:

-The amount you still owe. The amount you can refinance is determined by the amount you have paid for your mortgage and how much you still owe.

-The length of time you have been paying for your existing mortgage. If you have paid 15 years out of a 20 year mortgage term, refinancing will cause you to extend your payment once again.

-Your credit rating. If your credit score is great, then you will most likely have no problems with home mortgage refinancing approval. On the other hand, those with low credit rating will not only face difficulties with approval, but may be faced with higher interest rates or charges as well.

-How long you intend to stay in your home. If you intend to sell your house in a year or two, then you will most likely not benefit if you refinance. But if you will live for longer than ten years, refinancing can help you pay off your home sooner with some monthly savings on top.

-How much bills you pay for each month. If you are having trouble making ends meet or having problems paying of credit card bills and unsecured loans, refinancing can be a good solution to start with a clean slate by consolidating. Refinancing can help you save on monthly payments and get you started in saving for the future.

Tips to Ensure Financial Success with Refinancing

After you have carefully thought of the factors stated above, make up your mind as to whether refinancing is definitely a good financial decision for you. If you believe so, here are some tips to help you ensure success with home mortgage refinancing:

-To make home mortgage refinancing more worthwhile, make sure that the interest rate is significantly lowered, say at least 2 or 3% lower than your original mortgage. Consider the points as well. Lenders usually charge more points with lower interest rates, so make sure you weigh accordingly.

-Compare the total costs you need to pay off with your existing mortgage, with the some total you will be required to pay when you refinance. You can use a loan calculator available online to help you. Make sure you consider fees and charges you incur when you take on a new mortgage.

-Shop for a good lender. Be wary about fraud lenders, as they have become rampant in the recent years. Research about the lender's services, ask for recommendations and talk to some of their old clients. Also, ask them for a list of charges that they will impose to you at closing.

Home mortgage refinancing may offer you the best chance you have to get your finances straight, but it can only be so if you do it right.

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A mortgage is generally one of the biggest debts that a person faces in life, and a large part of that expense is due to the interest that is added on as time goes by. Most homeowners would gladly reduce that debt if the opportunity presented itself, though they do not realize that the key to reducing their mortgage debt lies in reducing the amount of interest that they pay on their mortgage. By paying off their mortgage months or even years in advance, all of the interest that they would have had to pay during that time obviously will not have to be paid. Also, the interest that will be paid will be at a reduced rate because they are reducing the total amount that the interest is applied to at a much faster rate.

The trick, of course, comes in figuring out a way to pay off the mortgage early. For individuals who live on a tight budget as it is, the thought of paying even more toward their mortgage may seem almost laughable. There are a number of ways that homeowners can pay down their overall mortgage in order to pay it off early without having to cause a strain on their finances, as well as services which can assist them in doing so if they aren't able to accomplish it on their own. Here are just a few examples of how a mortgage can be paid off early without causing undue financial strain.

Setting Aside Partial Payments

One easy way to pay off your mortgage early and possibly even make your finances easier to handle is to simply put aside a portion of your mortgage payment from each paycheck (or even from every other paycheck, if you get paid weekly.) If you put aside approximately half of your mortgage payment every other week, you'll end up saving the equivalent of an extra payment every year. Setting aside slightly more than half will cause an even greater savings, causing you to pay down your mortgage at an even faster rate. Depending upon the length of your mortgage term and when you start this savings plan, you can cut months or even years off of your mortgage. All that you have to do is pay whatever you have put aside each time your mortgage comes due (which should cause you to end up with a few payments that are significantly more than the minimum payment.)

Additional Payments at Tax Season

If you don't like the idea of having to keep track of savings over the course of the year, you might use income tax returns to help you to make up the difference. For many people, the amount that they receive in their tax returns is significantly more than their mortgage payment. While you may have at least some of your tax money earmarked for specific purchases or to pay off other debts, using part of that money to make the equivalent of an extra mortgage payment once per year can significantly reduce how much you owe. If you can afford to contribute more than just the amount of one payment or if you use this in conjunction with the savings plan mentioned above you can pay off your mortgage even faster.

Using Interest to Fight Interest

If you have a high-interest savings account, you can use that interest to help you pay off your mortgage ahead of time. Once or twice per year, pull out money from your savings that's equivalent to part of the interest that you've accrued and add it in with your mortgage payment. Provided that you have a high enough savings balance you should be able to make a significant impact on your mortgage debt by doing this. Over the course of the year the amount that you add to your mortgage payments could potentially equal an entire extra payment or more.

Bi-Weekly Mortgage Services

Should you worry that you can't keep yourself motivated to keep making these extra payments, you might consider using a bi-weekly mortgage service. These services automatically withdraw one half of your mortgage payment from your checking account every two weeks, and then make your payment for you when it comes due. The system works similar to the paycheck savings plan mentioned above, but since you have an outside company doing the work for you all that you have to do is make sure that you have the money in your account to cover the withdrawals. Though the services do charge fees to cover their costs, the amount that you save in interest payments will be significantly more than what you pay to the service.

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For years, lenders have utilized credit scoring to determine whether or not an individual is a good credit risk. Credit scoring has recently become a hot topic, due in large part by the mortgage lending industry's willingness to use the process to evaluate one's likelihood of repaying home mortgage refinancing or second mortgage loans. Even insurance companies use credit scoring as part of their underwriting procedure when writing automobile and home insurance coverage.

Credit scoring is a system, based on a statistical program, which awards points for certain factors that help predict who is most likely to repay a debt, such as a mortgage refinancing or second mortgage loan. The total number of points, or score, is what lenders use to determine an individual's creditworthiness. A large random sample of customers is taken, and analyzed statistically to identify characteristics relating to credit risk. These factors are then given a weight based upon how strong a predictor they are of who would be a good credit risk.

Credit scoring models do vary from lender to lender, but most generally include the following factors:

1) Your current amount of debt as compared to your potential total available credit.

2) Payment history on current and previous accounts.

3) The length of your credit history.

4) The number of credit inquiries (each time a creditor pulls credit in response to your application).

5) The number of separate open accounts.

6) Collection actions including judgments, repossessions, foreclosures, and bankruptcies

Using the statistical program, lenders compare this information about you to the credit performance of other consumers with similar profiles. Therefore, it is usually more reliable than a subjective or judgmental decision, because it is based on real data and statistics. Although it may seem somewhat impersonal, when used properly, credit scoring can allow creditors to evaluate credit applications faster and more accurately than individuals, in an impartial and unbiased manner.

In addition, the home mortgage refinancing and second mortgage loan process has been shortened as a result of the speed in which mortgage lenders can now make decisions utilizing the credit score model.

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If you were to purchase a $150,000 home with a $120,000 mortgage (80%), and you paid an interest rate of 9% for 30 years, you will have paid over $227,500 just in interest (in addition to the original $120,000). That's nearly two times the cost of the home!

A credit card debt of $7000 (now the average) at 18% being paid at the rate of $20 principal plus interest each month will take over 29 YEARS to pay off, almost as long as a home mortgage. Interest charged on this credit card debt will top $18,400, more than 2.6 TIMES the original debt!

If you work for a living, you know that when you are not working, you are not getting paid. But interest never gets sick, never takes a vacation and never sleeps. It is working against you 24 hours a day, seven days a week, each and every day of the year.

So what can you do?

You may not be able to pay off your debts or mortgage now. You may not have enough equity in your home for a loan. You may not be able to afford the refinancing costs or home equity loan costs. You may not be able to lower your credit card interest rates.

But you can make additional or extra payments.

So how does making an extra payment help lower your interest charges? Is it going to make next month's bill smaller? You can't scrape together too much for an extra payment so how is just $10 going to help when you owe tens of thousands?

The secret is in making early and consistent extra payments. For example, on the home mortgage shown above, if you pay an additional $100 each month you will save over $82,000 in interest payments. Not only that, but you will also have your home paid off nine years and two months earlier. You knock nearly 10 years off your mortgage just by paying an extra $100 a month.

How does that work?

Well, that $100 extra you pay the first month would have cost you about $270 in interest to borrow for 30 years. Since you have paid it already, you can reduce your last mortgage payment by $270. The next month's extra payment will reduce your last mortgage payment by $268. Each month as you pay that extra $100, your final mortgage payment will be reduced until you won't need to make a final payment, then the second to last payment, then third to last and so forth. Soon you will have shaved years and thousands of dollars in interest charges off your mortgage.

That's great, but maybe you can't spare $100 each month. How about $50, $25, or even $10? An additional payment of $50 each month will save you five years and seven months and about $52,000 dollars. $25 each month will cut your time by three years and three months saving you about $30,000. Just $10 a month will reduce your time by one year and three months and save you over $13,500.

Every little bit helps. Some months you may only be able to add $10 to your payment; some months you may be able to add $200. And this applies to interest on credit card payments or any other kind of debt repayment. Paying down as much of the principal (or amount you owe) each month will help reduce the interest you are charged and the length of time it takes to pay off the debt.

So why don't the credit card companies charge you more of the principal each month?

How would you like to be making 18% on an investment? Wouldn't you want this investment to last as long as possible? Of course! So do the credit card companies. They are happy for you to pay off your balance, but even more excited for you to keep paying them that 18% interest.

There are some other interest tips and tricks.

- One trick your mortgage company may have played on you is to include a prepayment penalty in your mortgage. If you try to pay off your mortgage early they may actually charge you for doing so. Or they may only apply part of your payment to the principal and take the rest as a "service charge."

- Make sure when you make an additional payment that you send a check separate from your monthly mortgage payment with instructions that the amount is to be applied toward the principal of your loan. Otherwise they may just apply it towards next month's payment and still charge you the interest.

- Generally you will not have this problem with credit card companies. But watch out for late payments or going over your credit limit. They may then use these "rule infractions" as cause to raise your rate to over 25%!

- If you are looking to refinance your mortgage, look for a mortgage that lets you pay on a bi-weekly basis. Since many people receive a bi-weekly paycheck this also makes it easier to budget your money. If you are paying every two weeks you will make an additional monthly payment each year (26 bi-weekly payments vs. 12 monthly payments). Also, because you are paying the principal down every two weeks rather than every month your interest charges will be reduced.

You CAN take control of your interest charges. Make those extra monthly payments. The feeling of being debt-free will far outweigh the temporary pleasure of that burger, movie or new DVD-player.

************************************************************ © Simple Joe, Inc. David Berky is president of Simple Joe, Inc. a marketing company that sells simple software under the brand name of Simple Joe. One of Simple Joe's best selling products is Simple Joe's Money Tools - a collection of 14 personal finance and investment calculators.

The adventure begins. As you enter into a loan process, be diligent in expressing your concerns with questions you need answers to. Fining out your plans, and the results you want from refinancing your home is our beginning point.

You went through a long drawn out process of ?paperwork here - paperwork there? in buying your home. In refinancing, it?s not that drastic because you have established yourself as a home owner.

Helping you get those results, we discuss your consumer history (credit report). It?s the primary source of direction you go through in the details of your new home mortgage program. Important items that you provide are used in the pre-qualification steps as your loan request package is put together.

Your consumer history report shows a lot about how you manage your spending income. Scores are assigned by the Credit Bureaus based upon their grading principles from 350 to 800. They receive reports from almost every kind of lender whether a department store, an auto loan, to a doctor expense. The percentage of consumers who experience ?bumps? on their credit is very high. It?s how you handle the ?bumps? that counts the most in your score.

Having the report, gathering important documents like pay stubs, W-2?s, bank statements, mortgage statements, home owners insurance policy coverage, 1040 tax returns, and so forth are reviewed for stability, verification, and usage in the loan obtaining process.

When all the items are in hand, we then discuss your loan request package with different mortgage lenders who will accept your ?middle? consumer history score, your income, work history, mortgage history among other items in your request.

We establish the different loan programs available to your qualifications and needs for a loan period of 2-50 years, loan % rate, loan payment choices, establishing of an escrow account, return of home equity, consolidation of consumer debts etc.

Keeping in mind, that all of the program characteristics most meet or establish a financial goal to help you improve your lifestyle. Debts are the down side of having financial freedom. Helping you understand the importance of having excellent consumer history and maintaining it is a personal goal of mine.

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Locating a Down Payment

If you are a saver, and many of you are, than the need to locate a down payment will not be an issue for you.

But there are also many of us out there that have not had the luxury to save as much as we would have liked for various reasons. With this challenge at hand, we will need to track down a source for a down payment.

If you have excellent credit, and when I say excellent, I mean your credit history is perfect without a blemish on it, you will most likely be able to apply for a mortgage with 100% financing, if you choose to go that route.

A lot of lenders offer this product, and if you can swing it, than you won't need to come up with any cash for a down payment, and you will only be responsible for closing costs.

If you are unable to go with 100% financing, here are a few ideas you might look into to come up with a down payment.

Retirement Plans

If your employer offers a retirement plan such as a 401k, you might want to consider borrowing from it to help out with your down payment. Most 401k plans offer this option for home purchasing reasons. You do however have to pay this money back on a monthly basis.

The down side to using a 401k plan is that when you pay the loan back, you are doing it with after tax dollars.

With that being said, it is still worth looking into, and a lot of people consider this option.

Family

When all else fails, ask family members to give you a helping hand. This is not an uncommon practice among newlyweds who often approach their parents for assistance with their down payment.

If this is not for you, I understand. It can be tough to swallow your pride and approach family members to help you out.

Save

If you are at the end of your rope, and there doesn't seem to be any down payment money in sight. You just might have to bight the bullet, start saving, and wait it out.

A great way to jump start your savings is with your tax return money. Depending on what your return is and what percentage the lender requires you to put down, your tax return could have you in the door sooner than you think.

An adjustable rate mortgage is called as ARM in short and it is a type of mortgage where the interest rate is linked with economic index, in this adjustable rate mortgage your payment and interest rate are adjusted accordingly when there is an ups and down in the changes of the index. An adjustable rate mortgage is just opposite to fixed rate mortgage and in this adjustable rate mortgage the monthly payment and interest rate may vary time to time. Adjustable rate mortgage are the right choice as the interest rate will be decreased whenever the interest rates goes down and when you are planned to have the home for a short period of time.

The important features of ARM are Index, Margin, Adjustable frequency, Initial interest rate and Interest rate caps. Lenders uses Index as a guide to measure the changes in interest rate. The index guides used by the lenders are 1,3 and 5-year treasury securities, but there are so many other index guides are also available. The lenders markup is the margin that would stand for the lenders cost for doing the business as well as the profit they will make out of the Adjustable rate mortgage, this margin will be added up to the index rate in order to arrive the total rate of interest and this remain the same for the entire lifetime of your loan.

Adjustable frequency is how often the rate of interest gets changed that is called as reset date. The adjustable frequency differs from one ARM to the other. The adjustable frequency gets changes every year normally, it can also be once in 5 years or it could change once in a month. It is better it changes less often as your financial risk gets lower as there will be change in the loan payment.

The initial interest rate is the rate of interest you would be paying until your first reset date, this will determine the initial payments of your loan and the lender may use this for qualifying you for the loan, normally the initial interest rate is less as your monthly payment will increases after the first reset date.

The interest rate caps will limit the amount that your monthly payment and rate of interest can increase, the most common caps includes initial adjustment caps, periodic adjustment caps, and lifetime caps

The questions would arise in your mind why should you go for ARM if the payments can go up, the answer is simple the initial interest rate in adjustable rate mortgage is lower compared to the fixed rate mortgage and will remain the same during the entire life term of the loan, this means lower interest rate is lower loan payment and this will in turn helps you to qualify for huge amount of loan.

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Getting a mortgage can be a very confusing process. There is a lot of paperwork to sign, documents to read and procedures to be followed. You'd think you were applying to go to Harvard or Yale, except they don't require that much paperwork for you to be admitted! Although getting a mortgage can be a confusing process, there are three terms that every mortgage holder should know to better understand what he is she is getting into.

The first term you should understand is, amazingly, the word "term". Term refers to the length of the mortgage you are taking out - or the amount of time you are making payments.

Many mortgages run the gauntlet of between ten and thirty years. The longer the mortgage, typically the lower your monthly payment will be (and the more interest the mortgage company makes). Generally speaking, you should go for the shortest term you can comfortable afford - you'll save potentially tens of thousands (and in some cases potentially over a hundred thousand) dollars in interest by keeping the length of the mortgage as short as you can.

Next, understand the interest rate on your mortgage and how it is calculated. The interest rate refers to the amount of interest charges you will pay for the money you are borrowing, expressed as a decimal - such as 5.2 for 5.2%. Is it fixed or adjustable? In other words, is it the same through the life of the loan or does it change at specified periods in time? Most home buyers should try and steer clear of adjustable rate mortgages even though they can look better up front. They can often reset to higher interest rates and come back to bite you if you aren't ready for a jump in your monthly payments!

Finally, understand what closing costs are and how they are going to affect your purchase price. Often times, you are going to be responsible for coming up with these closing costs out of your own pocket. Closing costs consists of things such as appraisals done on the house, attorney fees, notary fee, deed fee - if there is a fee they can think of it usually falls under the term closing costs! Be a smart and savvy consumer, if you see a fee that you don't understand or doesn't seem right - speak up! Some mortgage lenders try to sneak in any fee they can think of to make a few extra dollars profit.

Understanding these three terms can help make you a more informed home buyer and help you find the mortgage that is right for you. As with any product, it is important to shop around for a mortgage when you are considering buying a house. Even a small change in the interest rate between two lenders can often to amount to thousands of dollars in savings. Don't be afraid to comparison shop - it's your money after all!

If you are looking for help to better understand mortgage terms, rates and information, please fill out the form below and one of the LifeandHomes Mortgage Sponsors will contact you.

Whether you are a first time home buyer, or you have been purchasing real estate for years, one of your main goals other than finding the perfect piece of property is to make sure that your mortgage rate is as low as possible. Anyone who has had to navigate the tricky waters of the mortgage markets knows that rates can vary day by day and knowing when to lock in the rate can save you thousands over the life of the loan.

When looking for a mortgage one of the most important things to keep in mind is that competition is key to getting the lowest rate. Many first time home buyers make the mistake of not shopping around for a mortgage. They take the first offer that is presented to them and often end up with a rate that can be as much as one or two full points higher than rates for others with a similar financial background. They think that their real estate agent is there to help guide them to the best choice - when in reality they are there to earn their commission. The best advice for new home buyers is to always make sure that you separate your financial transaction of buying the house away from the process of finding a home. The rule of thumb is you should compare rates from at least three different providers, more if you have the time.

Even experienced real estate buyers can sometimes end up over paying their interest. The biggest gotcha is not locking in your rate when you had to the chance. This is especially true in times of economic downturn or when there is uncertainty in the credit markets. Often you have less than 48 hours to lock in a rate once presented to you by your lender. If you are uncertain whether rates are going to go up or down after you lock in a good rule of thumb here is to watch the 10-year Treasury note. Mortgage rates tend to follow the yield for the 10-year note more than they do any other short-term investment, including Fed rate adjustments.

When you do decide to lock in a rate make sure that you get it in writing, including a full disclosure of the terms. Oral agreements won't hold up should you need to pursue legal action. A written agreement protects both you and the lender from any miscommunications. You will know exactly what you are getting on what terms and how long the rate lock is good for. Typically, you want to aim for 30-60 days to give you enough time to find the house that is right for you. However, 30 days is becoming more standard as the rate markets continue on their roller coaster ride.

You might also want to consider asking about a float-down agreement to lock in the rate. Under this agreement the lender keeps the rate at your locked in value should rates go higher, but if they decrease they lower the rate to match. The only drawback to these agreements is they can be expensive and depending on the size of the mortgage note the cost to enter into such an agreement may very well offset any savings you would gain unless the mortgage rate declined by more than half a point or more in many cases.

Locking in a mortgage rate is the best way to get the mortgage you want at terms you can agree with. It lets you focus on finding the perfect home of your dreams instead of worrying about fluctuating mortgage rates.

People interested in a 100 percent refinance are looking to cash out the total value of their homes. This type of loan does not require any down payment and one can use the money for anything that they like. Fixing up oneís home, paying off bills, or going on vacation are all legitimate options.

When an individual refinances the full value of your home, they are essentially taking out all of the value of the property. It will cost. One will typically be required to pay up to three percent of the homeís total value to cover closing costs. Also because one is using up all of the equity in your home, they will, in most cases, have to purchase private mortgage insurance. However, if one works with a sub-prime lender, they may be able to get the insurance waived. Refinancing will provide some tax benefits. Individuals will be able to deduct interest and closing costs. To find the very best rates, one will need to do some research. There are plenty of online mortgage websites that will pit lenders against each other to refinance your home. One will be able to compare the rates and terms of different mortgage companies. To speed this process up, an individual should be sure that they have some idea about the value of their home, their credit score, how much debt they have and their income and other assets. This will enable them to receive a realistic quote and give them some idea regarding their options.

When looking to refinance the full value of onesí home, one may have to be creative with financing. Besides a straight 100 percent refinance, one might consider refinancing two different mortgage loans. This allows individuals to forgo private, mortgage insurance (PMI), which will cost hundreds of dollars a year. Two, separate refinance loans also allows one to structure terms differently for each loan. One loan can be borrowed at a fixed rate, while the other one at an adjustable rate. There are many different options. One is only limited by their imagination, credit score and the condition of the property.

For individuals who need a large sum of money fast, refinancing and cashing out the full value of oneís home, is one way to get it. There are many reasons that an individual may consider doing this. Paying for a childís college tuition, investing, purchasing more property, paying off debt, or making home repairs are a few reasons. Because one can lose their home if they are unable to pay back the loan, a 100 percent refinance should be carefully considered beforehand. There are likely to be higher monthly payments and private mortgage insurance, so one must be fully confident that will be able to successfully absorb these costs before proceeding.

"As always, water is your home's biggest enemy," says Eric Sanders, vice president of Risk Services at Fireman's Fund Insurance Company. "Every year, water does more damage to homes than fire, but every year too many people forget to do the little things that protect their property."

Burst pipes and indoor flooding can wreak havoc on your home and personal possessions. While faulty pipes can be a problem in any season, even well-maintained pipes can burst if they freeze - and they are much more likely to give way during winter when temperatures plunge.

A bit of preventative maintenance can help your family stay warm and dry all winter. Wrapping exposed water pipes with insulation is a quick and easy precaution.

Another excellent way to prevent indoor flooding is to install an automatic water shut-off valve. These devices cut off all water to your home when they sense unusually large amounts of water flow and can be integrated to your alarm system so that the alarm company is alerted to the emergency. Shut-off valves are a great idea for people who plan weekend trips or extended vacations and are also good for vacation homes that sit empty for long periods.

And if you do leave home this winter, keep the heat set to at least 55 degrees. Spending a little more on heating can prevent freezing in the pipes that run through exterior walls and foundations while you're off enjoying a winter getaway.

When the weather turns really nasty and knocks out power, a backup generator will protect your home and family from winter's worst ravages.

"If you have a backup generator, be sure that it's connected to your home's most vital systems: sump pumps, security and fire alarms," says Sanders. "Many people simply wire generators into the 'comfort circuits,' like lighting, heating, cooking and refrigeration, and forget about the other systems running in the background. If the power goes out, you'll want all your security and plumbing to keep right on working."

While water is winter's most invasive weapon, furnaces, boilers and chimneys represent serious fire risks if not properly maintained. A professional chimney sweep can remove soot and other combustible debris that builds up over time and boilers and furnaces should be inspected annually. Also, never use boiler or furnace rooms for storage.

Candles are always popular during the winter season. Don't leave burning candles unattended and keep them away from flammable objects.

Finally, put new batteries in smoke and carbon monoxide detectors and test them to make sure they are in good working order.

In addition to the important safety ideas provided above, there are several incredibly easy things you can do to reduce your energy bills this winter, including:

* Install weather stripping around doors and windows, caulk exterior windows

* Reverse the direction of ceiling fans to recirculate warm air downward

* Install plastic shields on basement and attic windows

* Consider sealing off areas of the house that are rarely used

* Keep closet doors shut

* Move furniture away from heating vents

* Close the fireplace damper when not enjoying a fire

* Wear sweaters and slippers inside

You may be thinking about modifying your mortgage because of the economic crisis these days. However, the last thing you want to do now is to make uniformed financial decisions. Mortgage modification is not an either-or issue. Mortgage modification may be good for some and bad for others. Is mortgage modification for you? Here are some things you may need to know before deciding.

Low Cost Processing

Processing a loan modification is not that costly or may even be processed without any cost at all. Modifying a mortgage would take about 30 to 180 days.

Extended Term

The shorter the terms in mortgage the more negative the amortization. Negative amortization is when the minimum monthly payments are so high, thereby making debt settlement difficult. Through loan modification, loan providers would initially extend the terms of the payment. A longer payment scheme lessens the amounts of monthly payments thus making loans more affordable.

Low Interest Rates

Mortgage modification basically reduces the rates to as much as 3 to 7 percent. Just refer to your loan provider for the rates, thus rates reduction would depend on your lenders.

The principal balance is the total amount that you have to pay. Mark down in the principal balance will also depend on your loan provider.

Like everything else, load modification also has its drawbacks. Some of its disadvantages include the following:

Eligibility Requirements - To find out if you are eligible for mortgage modification, you will need to submit documents for financial evaluation. A thorough verification of the borrower?s status will be made to ensure that the borrowers are really eligible for the program.

Negative Effect On Credit History or Background - Obviously, not everyone is eligible for home mortgage modification. Usually loan providers take precautions in choosing a borrower. They would prefer individuals with good credit background in the past or provide a higher credit limit to individuals with good credit standing. People modifying their mortgage would result to higher credit risk than those who don?t, since it would greatly affect your future borrowing abilities depending on how the loan was modified. Many borrowers would call off in modifying their loan, it?s because they want to maintain a good credit record which can be used as a future reference for upcoming loans, more so if they want a higher loan amount.

Scams - Loan mortgage modification can be tempting and it is not unlikely to find individuals taking advantage of the program. It would be best to consult people who are knowledgeable of mortgage modification process before entering into an agreement with a third party. Just be cautious, for you might be scammed.

Modifying your mortgage is an option to consider when you are facing financial hardships. But before making your decision you have to weight the pros and cons of the program. You have to take into consideration the benefits that the program would give to you. It is best to consult a professional, who are knowledgeable on loan modification to ensure your security.

Check out more options online for your second home mortgage. Log on to http://www.homemortgageonline.org for the latest updates.

Article kindly provided by UberArticles.com

Provided by First Source Federal Credit Union

Choosing a home and applying for a mortgage in this market can seem a daunting task, especially with all of today's options and constantly changing news on rates, rules and credit. We'll help you get started with the basics- information and terms you'll need to know as you enter the home buying (or refinancing) market.

Of Interest

Of course, one of your first concerns is the interest rate you'll get on your loan. How are rates determined? They fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Inflation tends to have the largest influence; modest inflation generally leads to lower interest rates, while rising inflation normally causes interest rates to rise. The Federal Reserve, our nation's central bank, implements policies designed to keep inflation and interest rates relatively low and stable. In addition to interest rates, you should consider closing costs, and the kind of lender with which you want to work.

What's the Score?

A credit score is one of the primary pieces of information used to evaluate your application. Financial institutions have only recently begun to use credit scoring to assist with their mortgage loan decisions. Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. Some of the things that affect your credit score include: your payment history, outstanding obligations, the length of time you've had outstanding credit, the types of credit you use, and the number of inquiries made about your credit history in the recent past.

The higher your credit score the better, but remember this is not the only measure used. Many lenders make decisions based purely on "the numbers" -your credit score, income, assets and liabilities - while others will take into account your personal situation as well.

ARMed and Ready?

The primary mortgage categories are fixed rate mortgages and adjustable rate mortgages (ARMs). A fixed rate mortgage locks you into a fixed payment every month, on a regular schedule, until the principal (cost of the home) and interest are fully paid. The most popular terms of payment are 30 and 15 years.

An adjustable rate mortgage offers a lower initial interest rate, but with a trade-off: the rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly. Rising interest rates could lead to higher monthly payments in the future. If your income is likely to increase in the future or if you only plan on being in the home for three to five years, an ARM can be an attractive choice.

Details, Details

There are many details to consider. What size mortgage can you handle on your income? Should you pay discount points in exchange for a lower interest rate? How much money (if any) do you need to put down at closing? Will you save money with a shorter term mortgage? What taxes, fees and insurance are required? And so many more.

To cut through the confusion, choose a friendly, helpful lender with your best interests in mind (preferably one that has a loan officer in the branch to whom you can speak). Do your homework upfront: visit their website to get all the information you can, and if they have online calculators, try them out to get ballpark figures. Write your questions down beforehand, and be prepared to take your time to get all of them answered.

Buying a home is a big step emotionally and financially. If you work with a reputable and helpful lender, it will be a rewarding experience as well.

Copyright. Used with Permission. Article provided by First Source Federal Credit Union. 315-735-8571. Visit www.fsource.org.

In 2006 and 2007, lax lending standards enabled hundreds of thousands of borrowers to qualify for loans they couldn't afford, causing them to lose their homes and their lenders to lose billions of dollars. Now the pendulum has swung to the other extreme.

New rules on income and debt make getting a mortgage harder today. In addition to a good credit score, your house payment should not exceed approximately 36 percent of your income before taxes. Furthermore, your monthly payment plus your minimum monthly revolving and installment debt should be less than 42 percent of your gross monthly income.

Finally, you may need to document virtually every aspect of your financial picture: income, employment, assets, debt and obligations such as alimony and child payments.

Here's some advice from Sue Stewart, a mortgage expert from MortgageMatch.com, a new web- site designed to make it easier to find and apply for the right loan.

1. Take Charge of Your Credit. Your credit scores and credit history are more important to lenders than ever. Check out your credit history at each of the credit-rating services: Experian, TransUnion and Equifax. Go over them carefully and take steps to correct errors.

2. Know How Much You Can Afford Before You Shop. Don't let yourself fall in love with a house you can't afford. With today's online mortgage tools, you can find out what you can afford in terms of down payment, closing costs and monthly costs that include principal, interest, taxes and insurance. Decide what your limit is and stick to it.

3. Get Your Documents in Order. Don't wait until you've put a contract on a house to get organized. It may take you some time to get all your documentation in hand. Find out from your lender or your real estate agent what you will need and be ready to submit everything with your application.

The good news about buying a home or refinancing these days is that interest rates are at historic lows. To take advantage of the "buyers' market," make it easy for your lender to approve the financing you need so you can house hunt with confidence.

A new mortgage website gives borrowers a complete estimate of their costs of ownership before they apply for a loan.

When looking for a mortgage in todays market you are swapped with information, products and deals. This can make the whole process very daunting and confusing. For this reason it is good to be prepared with a set of questions to ask your mortgage broker, so that you do not get ripped off and you know where you stand.

1. What are different types of mortgages and in what way do they work? - There are a mass of different types of mortgage products on the market, so make sure that your broker explains the differences between the different types of mortgages and how they can benefit you. For example may lender these days offer fixed rates, discounts and cashback over a number of terms. Also make sure that you get an outline of the varying ways of paying the capital off. This at first might seem to be a complicated area, but once you have the basics explained everything will become a lot clearer and you will start to see how different products will suit your personal circumstances better than others.

2. What is the Annual Percentage Rate (APR)?- In accordance to regulations the APR is meant to appear in all adverts alongside the headline mortgage rate. The APR is used to provide customers with the true cost of loans and empower them to be able to compare different deals. Do remember that APR is unreliable and is no substitute for personal prepared quote that outlines all upfront and ongoing costs.

3. What is the interest rate that I will be charged? - In the cases of fixed, capped or discount rate then your broker should tell you what the initial rate you will paying and how long you will be on that rate for.

4. So what happens at the end of the fixed or discount rate period? It is important to know what will happen when your fixed or discount rate period ends. Will you be switched on to the standard variable rate or will the lender offer you another discounted or fixed rate deal. Also remember remortgaging is a good option.

5. Standard Variable Rate. What is that? Because house prices are at a record high many people (probably including yourself) are now thinking of their mortgages in the long term as well as the upfront rate. For this reason it is worth knowing what current customers are paying. It is highly unlikely that when you come to the end of your fixed or discount rate period you will be on the same SVR as current customers. But you can use the information to see how the lender compares against others in the market.

6. What are the Early Redemption Charges or Early Repayment Charges attached to the product? Most mortgage deals will involve some kind of repayment charge. So you will have to a fee to the lender if you repay your mortgage early or switch to another lender within a set time period. Make sure you find out precisely what you will have to pay and what would happen if you moved home during the mortgages term.

7. What will my monthly payments be at the quoted interest rate? Your broker should tell you exactly what your monthly payments are going to be. They should also tell you what you would be paying at the SVR as to give you an indication of what you will be paying after your products term comes to an end. Get the broker to work out the payments on interest rates of up to 11% as well. This way if the interest rates rise substantially you will be able to see if you can afford the mortgage.

8. Are there any other conditions attached to the mortgage? Different lenders will have different deals, incentives and clauses. Lenders will offer better discounts, fixed rates or cashbacks if you are prepared to take the lenders building and contents insurance. This is something that will be worth considering. Just make sure that you are informed about the terms and what would happen if you moved your insurance cover.

9. Are there any Higher Lending Charges? With some lenders there may be a Higher Lending Charge (HLC) if you are borrowing more than a certain amount of the value of the property. Make sure you know what the charges are and how much the fees are. Some lenders will add HLC charge to the loan others will charge it upfront.

10. What are the arrangement or broker fees? Your broker should tell you about every payment you will have to make to arrange your mortgage. This will give you an idea of the whole cost of the deal rather than just an upfront rate. This will also allow you to shop around and find the best deal.

So next time you are looking for a mortgage make sure you have these ten questions to hand.

James Copper enjoys writing on areas of mortgages and loans. He works for Adderson & Co. who are specialists in Secured Loans and the Bad Credit Remortgage.

Source: www.1starticles.info

The possibility of losing your home because you can't make the mortgage payments can be terrifying. Perhaps you're having trouble making ends meet because you or a family member lost a job, or you're having other financial problems. Or maybe you're one of the many consumers who took out a mortgage that had a fixed rate for the first two or three years and then had an adjustable rate and you want to know what your payments will be and whether you'll be able to make them.

Regardless of the reason for your mortgage anxiety, the Federal Trade Commission (FTC), the nation's consumer protection agency, wants you to know how to help save your home, and how to recognize and avoid foreclosure scams.

Know Your Mortgage

Do you know what kind of mortgage you have? Do you know whether your payments are going to increase? If you can't tell by reading the mortgage documents you received at settlement, contact your loan servicer and ask. A loan servicer is responsible for collecting your monthly loan payments and crediting your account.

Here are some examples of types of mortgages:

Hybrid Adjustable Rate Mortgages (ARMs): Mortgages that have fixed payments for a few years, and then turn into adjustable loans. Some are called 2/28 or 3/27 hybrid ARMs: the first number refers to the years the loan has a fixed rate and the second number refers to the years the loan has an adjustable rate. Others are 5/1 or 3/1 hybrid ARMs: the first number refers to the years the loan has a fixed rate, and the second number refers to how often the rate changes. In a 3/1 hybrid ARM, for example, the interest rate is fixed for three years, then adjusts every year thereafter. ARMs: Mortgages that have adjustable rates from the start, which means your payments change over time.

Fixed Rate Mortgages: Mortgages where the rate is fixed for the life of the loan; the only change in your payment would result from changes in your taxes and insurance if you have an escrow account with your loan servicer.

If you have a hybrid ARM or an ARM and the payments will increase and you have trouble making the increased payments, find out if you can refinance to a fixed-rate loan. Review your contract first, checking for prepayment penalties. Many ARMs carry prepayment penalties that force borrowers to come up with thousands of dollars if they decide to refinance within the first few years of the loan. If you're planning to sell soon after your adjustment, refinancing may not be worth the cost. But if you're planning to stay in your home for a while, a fixed-rate mortgage might be the way to go. Online calculators can help you determine your costs and payments.

If You're Behind On Your Payments

If you are having trouble making your payments, contact your loan servicer to discuss your options as early as you can. The longer you wait to call, the fewer options you will have.

Many loan servicers are expanding the options available to borrowers- it's worth calling your servicer even if your request has been turned down before. Servicers are getting lots of calls: Be patient, and be persistent if you don't reach your servicer on the first try.

You may qualify for a loan modification under the Making Home Affordable Modification Program (HAMP) if: your home is your primary residence; you owe less than $729,750 on your first mortgage; you got your mortgage before January 1, 2009; your payment on your first mortgage (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) is more than 31 percent of your current gross income; and you can't afford your mortgage payment because of a financial hardship, like a job loss or medical bills.

If you meet these qualifications, contact your servicer. You will need to provide documentation that may include: information about the monthly gross (before tax) income of your household, including recent pay stubs. your most recent income tax return. information about your savings and other assets. your monthly mortgage statement. information about any second mortgage or home equity line of credit on your home. account balances and minimum monthly payments due on your credit cards. account balances and monthly payments on your other debts, like student loans or car loans. a completed Hardship Affidavit describing the circumstances responsible for the decrease in your income or the increase in your expenses. For more information, see www.makinghomeaffordable.gov/modification_eligibility.html

If you're interested in refinancing to take advantage of lower mortgage rates, but are afraid you won't qualify because your home value has decreased, you may want to ask if you qualify for the Home Affordable Refinance Program (HARP) or the HOPE for Homeowners (H4H) program. For more information, see www.hud.gov/foreclosure.

Avoiding Default and Foreclosure

If you have fallen behind on your payments, consider discussing the following foreclosure prevention options with your loan servicer: Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.

Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you've missed a small number of payments.

Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn't going to help you if you're in a home you can't afford.

Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving, or cancelling, a portion of the mortgage debt. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, see www.irs.gov. A loan modification may be necessary if you are facing a long-term reduction in your income or increased payments on an ARM.

Before you ask for forbearance or a loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage. For example, if you can show that you've reduced other expenses, your loan servicer may be more likely to negotiate with you.

Selling your home: Depending on the real estate market in your area, selling your home may provide the funds you need to pay off your current mortgage debt in full.

Bankruptcy: Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to get credit, buy another home, get life insurance, or sometimes, get a job. Still, it is a legal procedure that can offer a fresh start for people who can't satisfy their debts.

If you and your loan servicer cannot agree on a repayment plan or other remedy, you may want to investigate filing Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts.

To learn more about Chapter 13, visit www.usdoj.gov/ust; it's the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that oversees bankruptcy cases and trustees.

If you have a mortgage through the Federal Housing Administration (FHA) or Veterans Administration (VA), you may have other foreclosure alternatives. Contact the FHA (www.fha.gov) or VA (www.homeloans.va.gov) to talk about them.

Contacting Your Loan Servicer

Before you have any conversation with your loan servicer, prepare. Record your income and expenses, and calculate the equity in your home. To calculate the equity, estimate the market value less the balance of your first and any second mortgage or home equity loan.

Then, write down the answers to the following questions:

What happened to make you miss your mortgage payment(s)? Do you have any documents to back up your explanation for falling behind? How have you tried to resolve the problem? Is your problem temporary, long-term, or permanent? What changes in your situation do you see in the short term, and in the long term? What other financial issues may be stopping you from getting back on track with your mortgage? What would you like to see happen? Do you want to keep the home? What type of payment arrangement would be feasible for you?

Throughout the foreclosure prevention process: Keep notes of all your communications with the servicer, including date and time of contact, the nature of the contact (face-to-face, by phone, email, fax or postal mail), the name of the representative, and the outcome. Follow up any oral requests you make with a letter to the servicer. Send your letter by certified mail, return receipt requested, so you can document what the servicer received. Keep copies of your letter and any enclosures. Meet all deadlines the servicer gives you. Stay in your home during the process, since you may not qualify for certain types of assistance if you move out. Renting your home will change it from a primary residence to an investment property. Most likely, it will disqualify you for any additional 'workout' assistance from the servicer. If you choose this route, be sure the rental income is enough to help you get and keep your loan current.

Housing and Credit Counseling

You don't have to go through the foreclosure prevention process alone. A counselor with a housing counseling agency can assess your situation, answer your questions, go over your options, prioritize your debts, and help you prepare for discussions with your loan servicer. Housing counseling services usually are free or low cost.

While some agencies limit their counseling services to homeowners with FHA mortgages, many others offer free help to any homeowner who is having trouble making mortgage payments. Call the local office of the U.S. Department of Housing and Urban Development (www.hud.gov) or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency nearby. Or consider contacting the Homeownership Preservation Foundation (HPF) at 888-995-HOPE or www.hopenow.com. HPF is a nonprofit organization that partners with mortgage companies, local governments, and other organizations to help consumers get loan modifications and prevent foreclosures.

When choosing a counselor, beware of anyone charging large up-front fees or guaranteeing you a loan modification or other solution to stop foreclosure. They shouldn't be charging you high fees or making any guarantees. Take your business elsewhere.

Consider Giving Up Your Home Without Foreclosure

Not every situation can be resolved through your loan servicer's foreclosure prevention programs. If you're not able to keep your home, or if you don't want to keep it, consider:

Selling Your House: Your servicers might postpone foreclosure proceedings if you have a pending sales contract or if you put your home on the market. This approach works if proceeds from the sale can pay off the entire loan balance plus the expenses connected to selling the home (for example, real estate agent fees). Such a sale would allow you to avoid late and legal fees and damage to your credit rating, and protect your equity in the property.

Short Sale: Your servicers may allow you to sell the home yourself before it forecloses on the property, agreeing to forgive any shortfall between the sale price and the mortgage balance. This approach avoids a damaging foreclosure entry on your credit report. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, see www.irs.gov, and consider consulting a financial advisor, accountant, or attorney.

Deed in Lieu of Foreclosure: You voluntarily transfer your property title to the servicers (with the servicer's agreement) in exchange for cancellation of the remainder of your debt. Though you lose the home, a deed in lieu of foreclosure can be less damaging to your credit than a foreclosure. You will lose any equity in the property, although under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt on your primary residence may be excluded from income when calculating the federal taxes you owe. However, it still must be reported on your federal tax return. For more information, see www.irs.gov. A deed in lieu of foreclosure may not be an option for you if other loans or obligations are secured by your home.

Be Alert to Scams

Scam artists follow the headlines, and know there are homeowners falling behind in their mortgage payments or at risk for foreclosure. Their pitches may sound like a way for you to get out from under, but their intentions are as far from honorable as they can be. They mean to take your money. Among the predatory scams that have been reported are:

The foreclosure prevention specialist: The 'specialist' really is a phony counselor who charges high fees in exchange for making a few phone calls or completing some paperwork that a homeowner could easily do for himself. None of the actions results in saving the home. This scam gives homeowners a false sense of hope, delays them from seeking qualified help, and exposes their personal financial information to a fraudster.

Some of these companies even use names with the word HOPE or HOPE NOW in them to confuse borrowers who are looking for assistance from the free 888-995-HOPE hotline.

The lease/buy back: Homeowners are deceived into signing over the deed to their home to a scam artist who tells them they will be able to remain in the house as a renter and eventually buy it back. Usually, the terms of this scheme are so demanding that the buy-back becomes impossible, the homeowner gets evicted, and the 'rescuer' walks off with most or all of the equity.

The bait-and-switch: Homeowners think they are signing documents to bring the mortgage current. Instead, they are signing over the deed to their home. Homeowners usually don't know they've been scammed until they get an eviction notice.

For More Information To learn more about mortgages and other credit-related issues, visit www.ftc.gov/credit and MyMoney.gov, the U.S. government's portal to financial education.

The FTC works to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint or get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. Watch a new video, How to File a Complaint, at ftc.gov/video to learn more. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

If you have fallen behind on your payments, consider discussing the following foreclosure prevention options with your loan servicer: Reinstatement: You pay the loan servicer the entire past-due amount, plus any late fees or penalties, by a date you both agree to. This option may be appropriate if your problem paying your mortgage is temporary.

Repayment plan: Your servicer gives you a fixed amount of time to repay the amount you are behind by adding a portion of what is past due to your regular payment. This option may be appropriate if you?ve missed a small number of payments.

Forbearance: Your mortgage payments are reduced or suspended for a period you and your servicer agree to. At the end of that time, you resume making your regular payments as well as a lump sum payment or additional partial payments for a number of months to bring the loan current. Forbearance may be an option if your income is reduced temporarily (for example, you are on disability leave from a job, and you expect to go back to your full time position shortly). Forbearance isn?t going to help you if you?re in a home you can?t afford.

Loan modification: You and your loan servicer agree to permanently change one or more of the terms of the mortgage contract to make your payments more manageable for you. Modifications may include reducing the interest rate, extending the term of the loan, or adding missed payments to the loan balance. A modification also may involve reducing the amount of money you owe on your primary residence by forgiving, or cancelling, a portion of the mortgage debt. Under the Mortgage Forgiveness Debt Relief Act of 2007, the forgiven debt may be excluded from income when calculating the federal taxes you owe, but it still must be reported on your federal tax return. For more information, see www.irs.gov. A loan modification may be necessary if you are facing a long-term reduction in your income or increased payments on an ARM.

Before you ask for forbearance or a loan modification, be prepared to show that you are making a good-faith effort to pay your mortgage. For example, if you can show that you?ve reduced other expenses, your loan servicer may be more likely to negotiate with you.

Selling your home: Depending on the real estate market in your area, selling your home may provide the funds you need to pay off your current mortgage debt in full.

Bankruptcy: Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, and can make it difficult to get credit, buy another home, get life insurance, or sometimes, get a job. Still, it is a legal procedure that can offer a fresh start for people who can?t satisfy their debts.

If you and your loan servicer cannot agree on a repayment plan or other remedy, you may want to investigate filing Chapter 13 bankruptcy. If you have a regular income, Chapter 13 may allow you to keep property, like a mortgaged house or car, that you might otherwise lose. In Chapter 13, the court approves a repayment plan that allows you to use your future income toward payment of your debts during a three-to-five-year period, rather than surrender the property. After you have made all the payments under the plan, you receive a discharge of certain debts.

To learn more about Chapter 13, visit www.usdoj.gov/ust; it?s the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that oversees bankruptcy cases and trustees.

If you have a mortgage through the Federal Housing Administration (FHA) or Veterans Administration (VA), you may have other foreclosure alternatives. Contact the FHA (www.fha.gov) or VA (www.homeloans.va.gov) to talk about them.

First, let me tell you that mortgage debt is the only kind of debt I don't yell about. I don't borrow money - ever. But, I know most people won't do the "100% Down Plan" when it comes to buying a home. So what are your options?

For those of you who are in debt (which is most of you), let me tell you what Sharon and I did. Nearly 20 years ago my wife, Sharon, and I hit the financial bottom because of our debt. We did an unpopular thing to help turn things around. After years of marriage and owning hundreds of pieces of real estate, we became renters. Normal mindset is that you should buy and not rent but remember normal is broke. All these years later, I can see that that was probably THE best sacrifice we made. We were able to pay off our debts and save money for a house.

Although that's the smartest and safest route, if your heart is set on buying a home you can still do it wisely. But if you can't pay cash for a house in full, how do you figure how much house is too much?

Take some time to sit down and do the math. Your mortgage payment should not be more than 25% of your take-home pay and you should get a 15 year or less fixed rate mortgage. Notice I said a 15 year mortgage, not 30. Don't be tempted by the smaller monthly payments of a 30 year mortgage. The truth is 30 year mortgages are for people who enjoy being in debt so much they want to extend it for 15 more years and pay thousands of dollars more in interest for the privilege!

Now, you can probably qualify for a much larger loan than what 25% of your take-home pay would give you. But it's really not wise to spend more on a house because then you will be what I call "house poor." Too much of your income would be going out in payments, and it will put a strain on the rest of your budget so you wouldn't be saving and paying cash for furniture, cars and education.

The point is your house payments shouldn't take over your budget. Don't let your mortgage payments cause you major stress every month for years and years to come. Your dream home needs to be just that, a dream. You don't want it turning into a financial nightmare.

Dave Ramsey is a personal money management expert, an extremely popular national radio personality and best-selling author of The Total Money Makeover. Dave is changing the face of America by helping people get out of debt and build wealth. Ramsey exemplifies his life's work of teaching others how to be financially responsible, so they can acquire enough wealth to take care of loved ones, live prosperously into old age, and give generously to others. Read more of what Dave has to say about real estate at www.daveramsey.com (EZinearticles.com)