If you are going to buy a foreclosure there are two important details to keep in mind. For one, you will be buying directly from the bank. With a foreclosure the bank owns the home. This means that you and your agent will have to work with them when it comes to the asking price, etc. Generally speaking, banks do not offer much flexibility.

Secondly, most (but not all) foreclosures are in bad shape. This does not mean that the home will have major problems, but there is a chance that it will be trashed in one way or the next. Are you willing to possibly go through a long clean up process? If you are going to purchase a foreclosure this is something you should be ready to face.

There is no denying that you can save money by purchasing a home that is in foreclosure. But while there are many benefits of buying a foreclosure there are also potential drawbacks such as buying from the bank and getting involved a home that has not been kept up.

At the very least you should consider a foreclosure if you are in the market. Soon enough you will get a feel for the pros and cons of these properties, and whether or not you should buy one.

photo credit: EdTarwinski

Then consider the condition of the home you’re looking at. People that are facing foreclosures are having financial problems and in that situation most people let some things slide, things they don?t consider essentially, especially if the bank is going to take their home anyway. You may be looking at some hefty repair bills.

Look at the home’s history. It’s estimated that about 40% of all foreclosed homes were actually rentals before they foreclosed, this could mean there are still tenants and they’re not going to be happy tenants at this point as they?re facing eviction as the house is being foreclosed upon. It also means the landlord thought of the property as an investment and when the investment went south so did his or her interest.

So if you’ve still got the foreclosure rental investment bulb burning, although slightly dimmer, make sure you consider all the possibilities and investigate the property thoroughly before taking that leap.

photo credit: TheTruthAboutMortgage.com

Which banks are most likely to fail? Experts agree that smaller institutions are more likely to fail than those that have a global reach. One of the main reasons for this stems from recent real estate issues. Smaller banks often times extend construction loans to homebuilders and developers. Unfortunately, many of the homes that were built are not worth nearly as much as the original estimate. In turn, these builders and developers are finding it difficult to repay the money to the bank. Matt Anderson, a partner at Foresight Analytics, a research company, said, ?The demise of smaller lenders probably won’t have as noticeable impact on the national level, but in a lot of local markets around the U.S. it will be felt.

As you can see, the current bank failures are related to the real estate crisis in many cases. So until the real estate industry gains solid traction, it is safe to say that small banks will continue to struggle; especially those that are greatly involved with construction loans.

For now, consumers will continue to keep a close watch on their money and particular institutions due to the rising number of troubled banks. Regulators are expecting approximately 200 bank failures within the next two years. Obviously, this is going to affect many people in the United States alone.

photo credit: Brandie!

Many people feel silly asking really basic questions about mortgages. They feel like this is something that they should already know since almost everyone they know has a home mortgage. However, you shouldn’t be afraid to ask the questions that you need to ask in order to make sure that you understand what you’re getting in to with a home mortgage. You can’t expect to know this information if you’re too afraid to find it out to begin with. And failing to ask those important questions can make the mortgage process far more confusing (and financially stressful!) than it should be.

Here are some of the basic questions that you might have about the home mortgage and some common answers that might help you start to gain a better understanding of what you’re getting in to when you take out a home mortgage loan:

Q: How do I choose a mortgage lender?

A: You’re going to want to do some research into the lenders in your area in order to determine which one is able to offer you the best loan. Most people start by checking out what the bank where they have their savings and checking accounts can offer to them. They may also ask their real estate agent for assistance in choosing a mortgage lender. The important thing is to review different options before selecting a mortgage lender in order to be able to get the best loan terms.

Q: How will a mortgage lender decide whether or not I qualify for a home loan?

A: There are several different factors that are going to be taken in to consideration by the mortgage lender to determine whether or not you qualify for a loan. These factors are also going to impact the terms of the loan including the amount of the loan, the length of the loan and the interest rate of the loan. Some of the factors that the mortgage lender will look at are your income, the amount that you have towards a down payment, your credit history and credit score, your other outstanding debts, and any assets that you own. The lender is also going to look at the property that you’re thinking about purchasing.

Q: How much will I need for a down payment on the home mortgage?

A: This varies depending on the loan that you are getting and the amount of the home that you are looking at. In general, you want to pay as much down initially as possible in order to require a smaller loan. However, the magic number to shoot for is approximately twenty percent of the cost of the home that you are looking at purchasing. So if you’re looking at a $100,000 home then you should try to pay $20,000 down and get the mortgage loan for $80,000.

Q: What fees are associated with getting a home mortgage?

A: The fees that you’ll pay on a home mortgage loan transaction depend on the type of loan that you’re getting and the terms of the loan. You’ll want to clarify this with the lender before completing the transaction. The most common fees are lender fees which are basic fees charged by the lender for processing the loan transaction. You might also have to pay certain pre-paid fees such as hazard insurance fees associated with the mortgage loan. Fees are to be expected but should be a low percentage in comparison with the mortgage loan and should be fully discussed with you by the lender in advance of getting the loan.

Q: What’s the whole fixed-rate / adjustable-rate thing I always hear about?

A: There are two different rates that you can get for the home mortgage. One is a fixed rate which is going to mean that the interest rate on the loan never changes over time. The other is the adjustable rate which means that the interest rate is going to vary with the market. The benefit of getting a fixed rate loan is that you always know what the interest rate will be which makes it easier to budget payments. Additionally, if you can get a great rate on a fixed rate loan then you might save money in the long run. However, the adjustable rate loan may go through long periods of having a lower interest rate than a fixed rate loan and therefore could be a financially sounder choice. Discuss the options with the lender and look at current rates to determine whether you want to go with a fixed rate or adjustable rate loan (and if you even have a choice with the lender that you’ve selected).

Q: How much will my mortgage payments be?

A: This depends greatly on the terms of the loan. You can calculate a basic guesstimate using a mortgage calculator online. However, you should discuss the details with your lender.

The mortgage loan is something that’s going to cause you to have a lot of questions. The important thing is not to be ashamed to go ahead and ask those questions. The more information that you have, the better position that you’re going to be in to get the right kind of home mortgage.