Finance Loans CA

Mortgage fraud is a growing problem throughout the United States. You want the equity in your home to be more than the loan on your property. With the boom in the housing market there are those who will try to take advantage of this situation and try to get a quick profit. Here are some mortgage fraud schemes you should be aware of.

The first is property flipping. This is when land is bought, wrongly appraised for a higher dollar value and then sold fast. The false appraisal information is what makes this kind of property flipping illegal. The illegal practice involves usually the following: fraudulent property appraisals, loan documents that have been doctored, inflating the income of the buyer, buyer kickbacks and kickbacks to investors, and property or loan brokers, and appraisers and to those who are working for the title companies.

For instance a house worth $30,000 may be appraised for $90,000 or more in this illegal practice. Then there is what is known as the silent second. This is where a buyer of land borrows the money for a down payment from the seller by the issuance of a second mortgage that is not disclosed. The primary money lender thinks the person borrowing is investing her own funds in the down payment.

But the fact is the funds are borrowed. The second might not be legally recorded so that the primary money lender does not know about it. Then there is the nominee loans; straw buyers. This is where the identity of the borrower is hidden and a nominee lets the borrower use his or her name and his or her credit report in the loan application.

There is also a stolen identity issue which may be put on the application. The applicant possibly is involved in an identity theft scam where the real person does not know his name, personal information, and credit history is being used on a loan application.

Then there is the inflated appraisal where the appraiser is colluding with the borrower and submits an appraisal to mislead the money lender. The appraisers report falsely reports the property inflated value. In a foreclosure scheme the wrong doer targets homeowners who might default on home loans or those already in the foreclosure process.

Wrong doers trick the homeowner telling him or her they can save their house if they transfer the deed and pay up front costs. The wrong doer makes money from these tricks by remortgaging the land or taking the money paid by the owner of the house. The three most common foreclosure scams are the phantom help, the bust out and the bait and switch.

In equity skimming an investor may utilize a straw buyer. Then use misleading income verification records, and misleading credit history reports to get a mortgage loan in the name of the straw buyer. Before the escrow close the straw buyer signs the land to the investor by quit claim deed giving over all property rights and gives no title guaranty. The investor makes no loan payments and leases out the land until the foreclosure happens many months later.

Having a well experienced criminal lawyer Fort Lauderdale is greatly beneficial to the case. A Fort Lauderdale criminal attorney will use their expertise to fight for your welfare, guaranteeing the best possible outcomes.

Mortgage Fraud FAQ:

Question: Am I required to give information to a mortgage fraud insurance investigator?
I received a call from a mortgage fraud insurance investigator who wants to meet with me and go over my loan application for a home that I bought in 07. I sold the property as a short sale because I lost my job. Do I need to take an attorney with me?

Answer: You are being investigated for a felony crime, you need to hire an attorney.

Question: Where to report mortgage fraud by a person in OBTAINING mortgage?
Where can I report what may be lies by a person to obtain a mortgage? They are probably getting a FHA mortgage at that.

Answer: If you think there is true fraud involved then the department of HUD is where you go.

Question: How can I find information on the men and companies that commit mortgage fraud?
My home was taken from me by mortgage fraud. I can not afford an attorney. I have legal aid. They have now given me two attorney’s. They have informed me that I definitely have been scammed. But because it is so detailed and so much involved and because they are a free service only so much time can be invested into my case. If I can help by finding information out about these predators, It will help me. As of now I’m basically screwed unless I can see if they have done this before.

Answer: Mortgages are a matter of public record. Your mortgage is on record at the county courthouse in the county which the home is in. You can also search many counties by mortgage company or bank name and dates. When a lender or mortgage broker wants to get leads, they search courthouse records for homeowners. You can obtain someone’s balance, rate, bank, etc. You should fight this until you are satisfied. Also, the lender that did your loan MUST be licensed in your state. A lot of brokers get away with doing loans in states where they have no license.

Question: How long do we have to stay in our primary residence after refi to avoid a mortgage fraud?

Answer: I think it depends. If you turn around and buy a new home immediately and convert your former residence to a rental, you are on a little shaky ground. However, if you are now selling the residence, there is no harm no foul.

I don’t think anyone even asks your intent beyond 12 months in conjunction with a loan closing and even at that there is nothing binding about the time frame.

If there is no default (that is the payments are made as agreed), the chances of anyone ever alleging fraud is minimal at best.

Question: How does mortgage fraud affects the subprime mortgage crisis?
In the actual Subprime mortgage crisis in the US huge amounts of mortgage frauds were discovered. What’s the part that these frauds played in the actual mortgage crisis?

Answer: Lenders were not clear or were untruthful about how the adjustable rates worked and what the consequences would be to the homeowner in the future when they adjusted. Some started folks out with what were called “teaser rates”, like 4%, but it would adjust significantly within a short period of time, like 1-2 years, and the new rate would be 8%! These folks had no clue. Loans officers were not licensed in most cases and were not held to a higher standard like Realtor/Appraisers are. Thus they bent the rules to make a buck.

Others like a few builders and others would use what are called “straw buyers” to sign closing paperwork on a property they really didn’t own. These straw buyers put themselves in deep trouble with Federal Authorities. And some appraisers were in the mix as well, dummy up appraisals to match the trumped up sales of properties. So it all came down to greed and now we are all going to pay for this for many years to come. I would estimate that somewhere between 85-95% of Americans will feel some effect of this on their credit with no control on their part.

Question: How can we get help for mortgage fraud. How to find a lawyer when a person is indigent?
Don’t know where to find help. My son who is developmentally disabled was conned into signing mortgage papers on four homes totaling over $1 million. He had great credit but was only making a little over minimum wage in a warehouse job when he answered an ad in a Chicago newspaper saying he could make money by helping other people with poor credit get housing. He was naive enough to believe this. Now all four homes are in foreclosure and we have nowhere to turn. We live near Chicago. How could they give loans to someone making so little money? Does anyone know where to go for help? He’s been served with papers. We are retired and cannot help him much.

Answer: Personally I would contact the district attorney. They should be able to press criminal charges, you or your son would not have to pay for this. We pay them via taxes to protect people like your son, I am sure they will be happy to jump all over this.

Question: How to check a mortgage fraud?
I’m suspicious about someone having a fraudulent mortgage in my name. Is it possible to see that mortgage in your credit history? If so, how do you check it? I checked my free once a year credit report but couldn’t find any information. How do you check if you have a mortgage or not?

Answer: Pull copies of your credit report from the 3 credit bureaus. Equifax, Experian & Transunion, you should be able to order a copy for free. If it’s not on your credit reports, it doesn’t exist. If you’re worried about ID theft, place freezes on your credit file at all three bureaus.

Question: What is the penalty for mortgage fraud, particularly if a home owner falsifies income on a loan?

Answer: It’s a felony with possible jail time. But if you are making payments on time no one will press charges if that’s all you did. It’s pretty hard to falsify income when you have to produce 30 days of paystubs (where employment is verified as well as income with HR) and tax records (when banks order an IRS transcript to make sure what you filed with the gov’t matches what you gave to the bank).

In recent years, the housing market has been on a very bumpy financial ride. Due to the sub-prime mortgage crisis which resulted in millions of homeowners losing their homes due to the inability to pay their monthly mortgage payments, President Obama’s mortgage refinance stimulus plan was implemented to help people stay in their homes and encourage people to buy a home. The plan included lowering interest rates so that people could take advantage of the savings. Now that the economy has shown signs of improving, many people are wondering how long mortgage rates will stay low or if there is going to be an increase in the coming months and next few years.

In this current economic environment where improvement in the economy is not happening as fast as we would like, as well as the continued Government and Federal Reserve support, most experts agree that for the next few months, there should not be much of a change in mortgage rates. Currently 30 Year Fixed mortgages rates have been hovering just under 5%. It is expected that 2010 will see rates rises to just over 5%. This is mainly due to the economy not getting worse and there are some signs that the economy will get better. However, many economists predict that low mortgage rates will be here for a little while, but not for long.

Economists suggest that as the economy grows and banks begin to increase their lending, mortgage interest rates will steadily increase to rates preceding the housing market crisis. In the next few years, many predict the pre sub prime mortgage crisis rates will return. This may be a good time for prospective homeowners to consider buying a home as the rates will not be making any further dramatic reductions, and over time they will begin to rise. Locking into a low rate now will definitely save homeowners money in the future as the rates start to rise. As well, by the first half of 2010, the Federal Reserve’s Housing Recovery Plan of buying as much as $500 billion of securities backed by Ginnie Mae, Freddie Mac, and Fannie Mae, will be coming to an end, so mortgage rates are expected to rise. Many experts believe rates will rise to over 5%.

Another consideration many housing market forecasters are worried about is inflation. Concerns about inflation could send Treasury yields higher which would cause an increase in mortgage rates. So, the mortgage rate prediction by many economic experts is that for the next few months, rates will stay about the same, and then they will begin to slowly rise in the next few years, depending on the state of the economy and the recovery progress of the housing market. But do not expect a continued decrease and the rates will eventually go up.

If you are considering refinancing or planning to purchase a home in 2010, this may be a great time to lock into a low interest rate mortgage. If not, you may miss out on a great deal if you wait too long.

There are a tonne of different ways someone can save money and invest in. We offer some of the best GIC rates. We also offer competitives mortgage rates. Do your research online and find the best rates.

Mortgage Rates FAQ:

Question: Why are bank mortgage rates always higher than credit unions?
Is there a reason for this? Does the bank offer services the credit unions don’t?

Answer: Credit Unions are owned by their members and don’t have to make a profit. Credit unions are generally more conservative in their lending so they lose less money from making the riskier loans their commercial bank brothers will. While it’s not always true, a Credit Union will often have better interest rates on savings also.

Question: What are some national fiscal policies that can affect mortgage rates?

Answer: The U.S. central bank, which is the Federal Reserve, makes decisions regarding fiscal policy. They decide whether to increase or decrease the money supply by decreasing or increasing interest rates. If the Fed decides to decrease interest rates, banks are more likely to lend to commercial establishments, as well as consumers, and as a result, consumers are able to obtain loans (mortgage, business, etc.) at lower interest rates. (We’re seeing this today with the current crisis.) If the Fed decides to increase interest rates, (which they are going to do soon) this gives banks incentives to keep more money in reserves, where they can earn a higher profit, therefore they will tighten their lending standards, and offer loans at higher interest rates.

Question: Once the $8,000 tax credit and mortgage rates rise, where will home prices go then?
What happens when the tax credit goes and rates got 7%?

Answer: Down, because the tax credit is priced into home purchases by the sellers, and down again, because interest rates at 7% (still a very low rate, historically speaking) will mean that people will be a little less able to borrow the principal.

Question: Should we have a legal right to capped mortgage rates on a homeowner’s primary residence?
What affect would a 2 or 4% cap on primary residence mortgages have on the economy?

Answer: I would not agree on any cap for mortgage rates because this would require a regulated market for mortgages versus the current open market concept. Furthermore, the mortgage rates reflect up to a large part the risk which the mortgage bank accepts to take when granting the loan.
Additionally, the rates are influenced by the market as such, by the demand of loans as well as the refinancing costs (or capital costs) banks have. Putting a cap on the rates or even regulating them would eliminate market forces.
On the other hand, any regulation would not improve the quality of a mortgage loan. This is still in the hands and under the control of the bank as well as the correctness of information provided by the client.

Question: Borrow more on fixed rate mortgage, is that possible?
We bought the house about 2 and half years ago on 4 year fix rate. Its only about a year and half to go till we finish our fixed rate, but we needed some cash for home renovation. Can we borrow more money from our mortgage?

Answer: Not without changing the loan agreement. The big thing is that your house probably isn’t worth what you paid for it a couple of years ago at market valuation, so you might not have enough equity to get a bigger loan.

Question: Is it hard to get lower interest rate on existing mortgage?
I have a mortgage [VA] through Citi @ 7.25% which I know is really high. How hard is it to get it lowered? Every year they send me a letter saying monthly pmts. are increasing due to escrow shortage [taxes], even though there’s no increase in prop.tax [Pmts. are never late].

Answer: You need to check out the property tax and escrow, they do an escrow analysis annually. Prop taxes usually increase. Ask Citi for loan modification. Call and ask, and keep calling and asking. That leaves your loan intact, but reduces your rate and is easier and cheaper than doing a refi.

Question: Fixed 30 year mortgage rate?
I would like to know if how much do the 30-year-fixed-mortgage rate varies from bank to bank? Given that I have already been pre-qualified for a loan and there is incentive (0.5point back towards closing cost) from preferred lender from my builder. Should I bother to shop around to see if other banks would beat out the preferred lender?

Answer: The lender associated with your builder could be adding some costs and telling you those costs are “normal”. That .5 point you think you are getting back could be built into the price of your home or the rate you will get. Also, now the builder knows exactly how much house you can buy. See what other lenders can do for you.

Question: 1 year LIBOR or Fixed rate mortgage?
My interest only ARM has reached the 5 year mark and now will begin to adjust yearly based on LIBOR. We looked into refinancing and have been offered 5.5% fixed, closing $3500. Our home value is $10K less than what we bought it for and we are $20K in CC debt. Do we lock in the fixed or continue with the low LIBOR rates to help pay off debt?

Answer: In this economy, a fixed rate would be better. If things stabilize, you can look at refinancing in the future to get a lower interest rate, but 5.5 is pretty good.

Cash is certainly crucial to ensure the smooth operations of any business. As they say, cash flow determines the profitability of a business. A profitable business will always have a sound cash flow. In simple parlance, cash flow is the receiving of cash or income, and the spending of cash or expense for business purposes. This form of financing comes in practical when the cash flow becomes constricted to resolve common business financial issues and concerns, or especially when the business is suffering from financial constraints.

A business may suffer cash flow constraints when it extends the credit period of the customers. This is seen as necessary by businesses to increase their sales. On the other end, however, the cash becomes constricted. The longer the credit period, the higher the sales, the more thinner the cash flow becomes. When the cash flow spreads too thin, a business may suffer serious repercussions. Here is where the importance of cash flow financing comes in useful.

Financing improves the cash flow of a business since it provides the business with the necessary and steady cash to fund important operational aspects and expenditures of the business. Availing this type of financing is not as complicated as it sounds to be. There are several financial companies that offer this type of financing to businesses who may be in need of such.

There are also several types of financing, from secured financing to short term financing. The flexibility of this type of financing helps businesses to get the money that they need how and when they want it. It is also very usable and practical to small businesses for their start-up or for their expansion.

Secured Financing

When you avail of the secured cash flow financing, you need to present guarantees or collateral against the funds that you are borrowing from the financial company of your preference. As a business entity, you can present your real estate or your credit collectibles from your customers. Since the borrowed cash is made against collateral, the interest rate for this type of financing is at a lower rate. You will also have the ability to choose as to when and how you want to repay the money that you have borrowed with its flexible terms.

Short Term Financing

A business can use the short term financing for several purposes such as to expand the business, maintenance of vehicle used for the business, to meet emergency expenses, and many more. This type of financing can be obtained within 24 hours from application, and one can do it online.

The loan amount that a business can borrow depends on one’s capability to repay the borrowed funds. Interest rate is a little higher than that of the secured financing since the funds granted on this type is given without one having to surrender collateral or guarantee. What is good about this kind of financing is that you can conveniently and easily do the transaction online. In a matter of a few clicks, you are well on your way to receive the necessary funds for your business.

Cash Flow Financing FAQ:

Question: I am preparing a cash flow statement. What exactly does the “cash flow from financing” entail?

Answer: “Cash flow from financing” is cash you borrowed for the business (operations) and are using. Cash Flow is generally the net of cash in & out.

Question: What is the amount to be reported under cash flows from financing activities?
A company reported that its bonds with a par value of $50,000 and a carrying value of $57,000 are retired for $60,000 cash, resulting in a loss of $3,000.

Answer: The actual amount paid out was $60,000 cash, so the answer is $60,000. However you should note that the loss of $3,000 is to be added back to net income under the operating activities section.

Question: Financing activities on cash flow statement?
Is an owner’s contribution considered a financing activity on a cash flow statement?

Answer: Yes, owner’s contribution (investment) is a financing activity on the cash flow statement.

Question: What software program is good for tracking personal finances, cash flow, income , expenses, budgets etc?
I’m looking for something that will help me organize all of my financial info: investments, expenditures, inflow outflow of cash.

Answer: For PC software, Quicken. Online: mint.com. I used to use Simply Money (somewhat limited, but very cheap)–though it doesn’t necessarily run on newer operating systems.

Question: How to prepare cash flow statement of a non for profit organisation? What should contain Financing activities?

Answer: I run 2 non-profits and we prepare cash flow statements every quarter. I use a general cash flow statement and add certain items, like fund raising/financing activities. If you do fund raising than list them and the donations you receive. List the different types of drives that you do. If you want to see a sample of listings try going on the web and look up other non-profits. Their tax records and sometimes their financials are available for review. If not send for a copy of their recent statement of accounts and they will be happy to send them to you.

Question: Why is “profit on sale of land” considered non-operating cash flow but “cash received from sale of land” not?
My CFA guide book says that “profits on sale of land” is considered financing cash flow, but “cash received from sale of land” is considered operating cash flow. I understand they’re both calculated in the net income, but I dont understand why cash received from sale of land is considered operating cash flow and profits not?

Answer: The cash received from the sale of the land is a return of capital.

Question: Question about Cash flow statement and Sale Purchase of Stock?
In the Cash Flow statement, under Total Cash Flows From Financing Activities I see there is negative 3,868,000,000 next to Sale Purchase of Stock. The company is Dell. My questions are, What is Sale Purchase of Stock? What does the negative 3,868,000,000 mean about the company (DELL)?

Answer: It means they are buying back a net $3,868,000,000 of their own stock. If they were selling more stock (than they bought back) it would be a positive number.

Question: What does continually financing with debt do to the company’s cash flow?

Answer: The more debt you have, the more you have to pay out repaying the debt and interest. So, it hurts your cash flow.

Are you really in a serious rut if you are unfortunately hit by foreclosure or short sale? When you are faced with foreclosure or short sale, the first thing that you must look into is your Beacon score. You have to understand that a foreclosure can lead to a 50 to 250 range drop in your credit score! This is an aggregate result of delinquent mortgage payments and the foreclosure of the property. The actual point loss is a function of your payment history and the ultimate impact of the foreclosure. Thus, if your pre-approval beacon score is 750 and foreclosure happens, it can lead to a maximum drop of 250 points. On the other hand, a 500 beacon rating may result to a mere 50-point drop for the same derogatory record.

This means that those with “higher” beacon score stand to lose more than those with lower credit score for the same derogatory record. It seems that they are being “penalized” more for having a better credit record. If your real estate property is foreclosed, you are looking at a 5 – 7 year waiting period before you can be able to qualify for another home purchase. This is based on the assumption of a lower range of your beacon score of at least 680 and 10% equity on the home purchase as down payment.

It is also important to note that a deed in lieu of foreclosure can have the same negating effect on your beacon score as that of a foreclosure. However, the real impact of this type of deed instrument will entirely depend on how credit bureaus consider the event. Credit bureaus have the prerogative whether to report deeds on the same terms as foreclosures or not, and when such incidents are reported as such, expect the same negating effect on the beacon score as that of a typical foreclosure.

Here are the following critical issues that you have to negotiate with your lender in as far as credit reporting of your deed in lieu is concerned:

• Paid as per Agreement – Your beacon score has already dropped by more than 100 points as a result of payment arrears. However, if the event is reported as “Paid as Agreed,” then you will be able to qualify for another home purchase for a shorter span of time than you would normally spend as a result of a foreclosure.

• Paid Settlement – This will result to a 75-100 point range drop in your beacon score. This is on top of the points drop as a result of prior payment delinquencies.

• Foreclosure – This will result to a 100-point drop in the low range and a 150-point drop on the upper range. This is also on top of the points you will have lost as a result of prior payment delinquencies.

One of the major advantages of deed in lieu of foreclosure is that you are able to qualify to purchase a new home after 4 years which is shorter than the waiting period applicable to those home buyers who have had their beacon score reduced due to foreclosure. Under existing guidelines, you are only required to have 10% equity in the home purchase as your down payment. Thus, if you are looking for a less “painful” alternative to foreclosure then this deed instrument may just be the right thing for you.

There may even be cases where the FHA will decide favorably on the applications of applicants who have lost their old homes through foreclosure, deed in lieu or short sale. Certain extenuating issues can be factored in and you may be cleared for a new home purchase after a shorter waiting period.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings.

Beacon Scores FAQ:

Question: What is the difference between the Beacon score and Fico score?
I know that FICO is an independent company that issues the summary score to the three major Credit bureaus that ranges some where between 400’s to 850. What is the top/bottom beacon score?

Answer: FICO is the company that made the software that the 3 major credit bureaus use to score credit based on what each one of them has in their database about a person. Each bureau names them differently, but they are ALL “FICO” scores. It is a generic name. The bureaus name their brand of FICO score as follows: Beacon, Empirica, Fair Issac (FICO=Fair, Isaac & Company named after the founders, Dr. Fair and Dr. Isaac).

FICO scores from 300 to 850 with anything calculating to below a 300 defaulting to a 0. Equifax shows a beacon score which is the same as FICO.

Scores are based on the following factors:

1. Payment history 35%
2. Time in bureau 15%
3. Types of credit 10%
4. New credit 10%
5. Debt to credit ratio 30%

Question: How can I find out what my beacon score is?
A credit report I have just received for free from Equifax does not show my beacon score. By the way, I live in Canada.

Answer: You will have to go back to Equifax Canada and pay for your credit score.

Question: Is there any place to get a sub prime loan with beacon scores at or below 500?

Answer: With a beacon that low, maybe not, but even so, why would you want one, the interest rates are going to kill you. Rent for a couple more years until you work to get your beacon higher. The money you save from your high interest mortgage can be used to pay off old or bad debt and at the same time your beacon score will go up. In the long run, it is the best way to go.

Question: If somebody has a beacon score of under 450. How would they obtain credit for a new business?
A friend of mine is starting a new business she thinks her credit score is between 450-500. She wants to open a new small business but does not know where to start with getting help to do so. She applied for her tax id number and her business license.

Answer: With that score she either has NO credit or a VERY, VERY lousy credit history which will get her nothing in the way of a loan. If she just has lousy credit why not clean it up before taking on a new business which, statistically, is domed to fail and she ends up with a boat load of new debt. If it is due to a lousy credit history she is just confirming she is really a very high risk at failing because she can not even take care of business on a personal level.

Question: Credit inquires hurt your beacon score anymore?
I keep hearing that has changed this year. I knew all hard inquires hurt your beacon in the past, but has it really changed this year?

Answer: Not true. However, loan inquiries for certain things have reduced their impact. For example, if you have 6 inquiries for auto financing with in a two week period it will only effect your score as one inquiry.

Question: Will “monitoring” my credit make my beacon score go down?
I friend recently told me that if I sign up for a credit monitoring service and regularly check my credit reports, my beacon score will go down each time as though a potential creditor were running my report. Is this true? Or do potential creditors know that it is me that is looking at the credit? Basically, if I frequently check my credit through one of these services, will it make my credit worse?

Answer: Monitoring your own credit report through a credit monitoring service will not cause your credit score to go down. This is considered a “soft” inquiry. Only you and the credit bureau see these type of inquiries. A “soft” inquiry may also include these scenarios:

1. Your credit card company checking your credit to see if you qualify for a credit line increase.
2. Credit card/loan companies checking to see if you might qualify for credit with them. If you qualify, they will send you an application.

Only “hard” credit inquiries will affect your credit score. This is when you actually apply for a credit card or loan. These type of inquiries are seen by a potential lender when you apply for credit.

Question: Typically, how many positive credit points will be added to my beacon score with an on-time mortgage payment?
If I am over 30 days late, I know that dings my credit- but on average how many points does it go up WITH a ON-TIME mortgage payment? Or does it?

Answer: Since the exact calculations used by F.I.C.O. are a closely guarded secret it’s impossible to actually answer this question. I can tell you that a mortgage paid as agreed over a long period of time is the single best thing that can show on your credit as far as score and profile go.

Question: How is your beacon score decided, what factors are included?

Answer: There are three credit bureaus and each has its own score calculation based on the information reported to them. Not all creditors report to all three bureaus, and some don’t report at all.

Your score is based on what is reported to your report. There is no formula or “deduction of points.” Your pay history, account balance, types of accounts, and types of creditors all affect your score. How they affect your score differs for each person, based on what is being reported.

Serious home buyers will always find ways to get the best value in their real property purchase decisions. They will always go for those options which they perceive can offer them good deals in terms of the intrinsic value both in the short term and long term.

One of the emerging options for bargain hunters are foreclosed homes. The inventory of foreclosed real estate properties are still within the upper range and lending companies and banks are anxious in unloading these properties to prop up their liquidity and improve their financial position. At best, buyers can snatch a good deal which can be as high 20% lower than the real market value of these real estate properties. However, the increased potential of earning windfall profits from the purchase is also accompanied by the increased risk of getting “dud” purchases.

If you are going to include in your options foreclosed real estate properties then it is crucial that you properly understand the rules of the game so that you don’t end up like a headless chicken running into a potentially disastrous real estate deal. Aside from the risk that you have to manage, you will also have to contend with the intense competition posed by experienced real estate stakeholders and investors.

If you are dead set in going the “foreclosure” route then it is critical for you to observe the following ground rules.

1. Launch a Comprehensive Search

You logical option shall be through online search of foreclosed homes for sale. You can get the list from websites that specialize in this particular privileged market and industry information. How can you narrow your search for the best buys? Your best bet shall be in locations where there is higher number of distressed real estate properties. In most instances, lending companies and banks are more aggressive in pushing for the disposal of these properties as they are being significantly weighed down by this financial baggage.

2. Stay Away from Court Auctions

This purchase option is better left to experienced and seasoned real estate investors. There are other ways we can get bargain deals from foreclosed properties without having to increase our chances of getting burned financially. Although, you can get the best bargains when you participate in court auctions of foreclosed real estate properties, there are a lot of negatives that can work against you especially if you don’t have the experience and wherewithal in taking calculated risk in your bidding options.

3. Get the Latest Market Updates

Knowledge is power and it is the single most important item that you must have in order for you to make informed buying decisions. It is extremely important for you to understand that foreclosed properties do not necessarily connote bargain sale. Make sure that you are not assuming an overpriced or bloated mortgage loan when you are buying a foreclosed property. You must remember that market value of real estate properties have gone down to record lows from their 2006 record levels.

4. Get a Pre-Approved Mortgage

Real estate experts stress the importance of getting a pre-approved loan before working on the purchase of foreclosed properties. Most lending companies have already instituted stringent requirements in the approval of mortgage applications particularly those involving distressed real estate properties. It is important that you are properly informed by your lender on the terms of mortgage plans for foreclosed properties.

5. Undertake a Thorough Inspection

Never finalize your decision to purchase a foreclosed property without a thorough inspection. Most of these properties will require repair and it is essential that you include the cost of repair in the assessment of the financial viability of the purchase.

Learn how to sell your own house here: For Sale By Owner

If you’re looking to buy a home from an FSBO listing check here: FSBO Listings

Foreclosed Homes FAQ:

Question: Where can you find free listings of foreclosed homes in your state?

Answer: Any real estate agent can get you a list, although most states will be broken into specific areas.

Question: Process for buying a foreclosed home?
I am trying to buy a foreclosed home that did not sell at the courthouse door. I put in a bid, and it is at the bank. How long will it be before I hear something? I just don’t understand this whole process.

Answer: That’s a little unusual. Banks don’t sell their foreclosures direct, they list them with Realtors. If you have submitted an offer directly to the bank, then you need to follow up and make sure it’s being considered. Historically they will sit on offers waiting for a higher one. Why? They’re trying to minimize their loss. On the other hand they may be clearing up the title. When a mortgagee acquires property through a foreclosure auction, they don’t get complete title to the property. They get a certificate of title. It takes a court action called quiet title, to perfect ownership. That may be the reason for delay.

Question: Any tax break for a foreclosed home?

Answer: If you bought one, the tax benefits are the same as buying any other home.

Question: Buying short sale homes vs. foreclosures…will banks move much on the price?
Are short salehomes as negotiable as foreclosures? I have purchased 3 foreclosed properties and negotiated awesome prices. I have never looked into or tried to purchase a potential short sale. Will banks move as much on them as they will a foreclosed house?

Answer: Just like in foreclosure you can get get discounts in short sales. The difference is the amount of time for it to get accepted. Short Sale can take anywhere from 3-6 months to get accepted and tons of paper work. I’ve made an offer and closed on a REO within 30 days. Both are very good techniques, I prefer short sales for a few different reasons.

Question: Ramifications of foreclosing on my wife’s home.?
My wife purchased a home before we were married. We are now both living in the house. I am not on the mortgage. The house is worth less than what we owe and we would like to buy a bigger one. I am preapproved for a mortgage on my own but can the bank come after us or her if we foreclose on the home? Will it just affect her credit. We are fine with doing it if it just ruins her credit and nothing else.

Answer: You don’t foreclose, the mortgagee (lender) does. Yes, her credit will take a hit, but she also risks a deficiency judgment. If you buy a home together (both in title) any judgment won’t attach to your new home. The judgment only attaches to property (real and personal) she owns herself. Double check with an attorney before proceeding.

Question: How to apply for foreclosed homes?
My husband and I have been trying to find a house and obviously been looking at foreclosed homes. How do I go about applying for them? Is it hard getting one? I am new to this and would like some information.

Answer: You don’t *apply* for one. You employ the services of a realtor after you have been to the bank and gotten your pre approval letter for a mortgage, and then you go look at foreclosed properties. If one is in your budget that you like, you work with the realtor to make an offer.

Question: Where can I find foreclosed homes?
Does anyone know of of any websites that list actual foreclosed homes without a fee?

Answer: Your BEST source for foreclosures is your local real estate agent. Precious few foreclosed homes can be purchased directly without using real estate brokerage. If a smaller local bank has a few ‘in house’ foreclosures, they will deal directly with you. ALL of the larger lenders will not deal directly with buyers. Their REO property is handed off to real estate agencies for disposition.

You can attend foreclosure auctions if you wish, but the deals there are rare. The MAJOR bidder on any auction property will be the lender holding the mortgage(s). They will bid up the price until the sale prices meet what they need to satisfy their loans. As well, you need cash to buy at auctions. No time to arrange financing.

Question: I’m buying a foreclosed home, I think the property tax are way too high considering today’s economy and other homes in the neighborhood. How do I go about getting my property taxes lowered?

Answer: Most likely you are going to get a larger tax bill at signing then when your purchase price gets recorded the amount will be reassessed on your purchase price. They are most likely charging you for what the home sold for last. Making the taxes larger. That’s the way it was done on our sale in CA. Took about 4 months to get the credit back once the property was recorded with our purchase price an reassessed on the smaller purchase price.

A responsible homeowner is concerned about the responsibilities that he will be facing prior to the purchase of a new home. If you are planning to buy a new home, it is important to be aware of the costs associated with the purchase to be ready with the financial consequences and determine if you are totally ready with the responsibilities associated with the celebration of moving to your new home. One of the costs that you have to be ready to pay is the title insurance. This is not covered in the mortgage and is included in the closing costs.

The cost of title insurance is not standard for all states and markets. In some cases, the rate can be set by the agent based on market pricing and can be easily negotiated. In other cases, the title insurance is determined by the Department of Insurance and can also be negotiated depending on the home value and some other factors.

There can be a basis for the computation and more often than not, this is based on per $1000 rate. This figure depends on the type of transaction. It can be a basic, re-issue, new construction or refinance rates. The policy for basic rate is computed based on the purchase price and mortgage amount. The re-issue rate uses the back title as a basis for the computation. The back title is determined by the seller owner’s policy and is usually lower than the $1000 rate. The rate for refinance purchases covers a policy that is issued to the owner of the mortgage loan. The insurance is a factor of the value of the previous mortgage amount. Just like re-issue rate, the insurance is lower than the $1000 rate. For new construction rates, the costs associated during the construction of the property is incorporated in the computation. The rate can go lower than the basic rate.

Because there is no specific defined rate for different kinds of home purchases, it is important for you to determine what the prevailing rate is in the state or in the specific area where the home that you intend to buy is located. You can use technology to get the necessary information but the problem is on the relevance of the information. You may not get the latest rates online. You may also not get this information very easily. It will be best to consult your financial adviser or your real estate lawyer if you already have hired their services. They have a clearer picture of the current rates and you can get a close estimate on the costs related to title insurance. With this information, you can prepare for the title insurance cost related to your new home.

Other than title insurance, you will also have to prepare for other costs and it is best to know these closing costs beforehand so you can manage your finances well and be able to say with eagerness that you are ready to move in your new abode.

Need to buy or sell a home in the Bothell, WA area? Check out Bothell Homes.

Title Insurance FAQ:

Question: What is the difference between Title Insurance and Owners title Insurance?
We are about to buy a home in and the closing is expected to happen in a few days. I was asked by mortgage lender that if I would be interested in ‘ Owners title Insurance policy’? Already there is a fee ($763.00) that I am paying as Title Insurance fees. So do I really need this extra protection of ‘Owners Title Insurance Policy’ and if so how will it help me to have this extra protection, when already I am paying for one.

Answer: The title insurance is the Lender’s policy that protects the lender from any liens on that property. The Owners policy is for you, the owner to protect you from any liens that may show up on the property. For example, if in 10 years the county finds that someone else owned part of your land and owes money on it, you would be responsible to pay that if you didn’t have an owners policy. It’s definitely worth it to get it.

Question: Title Insurance?
I understand that I need Title Insurance for my mortgage, however, do I have to have this through the same company that supplies the mortgage? Point being, my mortgage company have asked $1,700 title insurance (Virginia) for title insurance on a property that is valued at $300k. As I understand it, this insurance only covers them, and not me in any way if anything goes wrong. Is this correct?

Answer: First of all, title insurance rates are a set percentage of the purchase price of the house. Second, the title insurance protects YOU, in case it turns out after all the paperwork goes through, that there’s a PROBLEM with you getting clear title (like, some guy 50 years ago willed it to someone else, and a third party who had no right to it, sold it). So you’re not going to get a better rate elsewhere, and it doesn’t cover them – it covers YOU.

Question: What happens if the title insurance company closed business?
I’ve bought title insurance when I bought a new house 10 years ago. Now, I notice that the title insurance company has quitted and closed business. Does it affect anything? Does it mean no more insurance coverage to my deed?

Answer: Are you saying the title company closed, or are you saying the insurer that wrote the policy is no longer in business? It isn’t clear from the information you gave.

Usually, the title company does not underwrite the policy. You need to check the policy and see if the insurer is out of business–the title company and the insurer are not the same. If you find the insurer is no longer in business, you should contact the insurance department in the state you live in, and find out if these policies were assigned to another insurer. The state insurance department should be able to tell you whether or not your home is still covered. If the settlement company (title company) went out of business, but the insurer is still in business, then you have nothing to worry about.

Question: What is title insurance and can I purchase it and have it work in a foreclosure auction scenario?
The way my county works, all bank-owned foreclosures are sold through a public auction that requires 20% payment at end of auction. I heard that title insurance protects against unknown liens against the property which could very well happen in this situation.

Answer: You are correct in your assumption of what title insurance provides. Before a title insurance firm will provide insurance, they will perform a search of the condition of the title covering the property in question. Contact a local title insurance provider and explain to them what you propose to do, and they will advise you accordingly, as to what liens may be against the property.

Question: Is a Title Insurance company responsible when they do not disclose an open permit?
To make it short and simple, I am refinancing a house now. An open permit from 1949 came up, can’t close with out resolving. House was purchased in 1978 and this “open permit” never came up. Title Insurance was issued at purchase. Can we hold Title Insurance Company responsible for this?

Answer: Where did the issue of the “open permit” come from? Title searches involve property title history and encumbrances – not building permit issues.

Question: What is the purpose of title insurance and why do you need it?
I recently bought property and received the title insurance policy in the mail but it doesent seem to cover anything after reading the exceptions.

Answer: Title insurance generally assures the buyer that the seller has the right to sell the property. For instance, after the closing, somebody knocks on your door and says that the seller had no right to sell because the seller originally borrowed money from a friend to buy the property. Therefore the friend may have an interest in your property. Title insurance would cover this situation.

Question: Regarding title insurance, what is a site inspection? How much does it typically cost?

Answer: You are referring to a survey for mortgage purposes. In many states a survey is not needed for refinancing if you can provide one completed within the last several years and there have been no changes. I don’t know what state you live in but this would apply to most east coast states. I am a title insurance agent in 28 states so this answer is not just a guess. If you are purchasing property then a survey will likely be required, especially if you live in a rural area. If you want to do a bit more research on your own, ask your title agent which underwriter they write for and call the underwriter directly to ask if this mortgage survey is needed.

Question: What can be done when a title insurance company gives wrong info on their final commitment?
The title company provided incorrect tax information on it’s final commitment and closing papers. Their “insured” amount was $1100 less than what the actual taxes are. Therefore they did not collect the correct amount from the previous owners for their share of the year’s taxes. Isn’t the reason for paying for title insurance so to ensure all information including the tax amounts are correct? Since they had the wrong information to begin with the incorrect information shows up on the closing papers. I paid the amount that was on the closing papers but now am delinquent for the extra $1100+ they did not report. Are they not liable to pay the insured amount since it was definitely their gross error?

Answer: Who says it was their error? The title company requires satisfaction of open or unpaid mortgages or taxes. If the current quarter or yearly assessments were not ready yet, they had to work with what they had, and they didn’t pull the numbers out of their butt. Usually the assessors office or the collectors office gives a guesstimate number out if they don’t know the new figures. I do closings, and so many times I have been told the latest actual quarter plus 20%. Sometimes it is enough, sometimes it isn’t.

Contact them and ask if they held any escrow from the sellers proceeds for the estimated taxes. If they didn’t, then either you or they should contact the seller and ask for their pro-rated portion.

Commercial lending is a complex process that is very far removed from residential or personal lending.

What is it?

It is loans that are written to businesses for a host of reasons. Usually it revolves around expansion or securing property for a business.

How does it Work?

Usually a bank or finance company even sometimes private investors are willing to lend a business some money to get the business where it needs to be. It is different from personal or residential lending in many ways.

It usually has minimum limits, it would be very unusual for a commercial entity to walk into a lenders office and ask for a five thousand dollar loan. Small loans are usually handled through a line of credit. It is especially for property typically starts at the two hundred fifty thousand mark. It just makes sense to the banks and other lenders to have a minimum.

The lending process is also different from personal or residential loans. With this type of lending there are a lot more documentation that is required. There may be requests for three previous years worth of financials and taxes and a host of other information that would never be requested to write a personal or residential loan.

It is for the purchase of property usually requires a couple of site inspections and business plans. It is for property usually also has to include business plans to justify it. Sometimes with this type the owners, partners or sole owner has to put up there good credit to secure it. It is an additional safety net that is used by the lenders to be sure that the loan is going to be repaid. In cases where personal credit is used the person that is putting up their good name can be held liable for it if it has gone wrong. This is a very bad idea and should be avoided.

Who does it?

There are a few options. There are traditional banks that almost always do it. There are nontraditional banks that do it. There are funding agents that do it and there are private investors that offer it. Each entity will have different requirement and different rate schedules but they will all have plenty of forms and paper work to fill out and provide.

It is the only way that some businesses can grow. It is offered from many different avenues, it is a difficult process to navigate but is well worth it in the end for the business owners.

Commercial lending is almost always used to secure property and to expand.

If you are interested in this type of lending, go to Commercial Lending for more information.

Commercial Lending FAQ:

Question: Does anyone know the rate for a commercial lending?
I’m currently living in mexico and I want to invest in usa. I have some money to buy a commercial land but I don’t know the rates for a commercial lending to build a strip mall in that land so if anyone knows whats the rate for a 1,000,000 usd commercial lending I would be greatfull.

Answer: Most lenders have strict rules about lending to people outside of the country. Call a commercial real estate broker located in the area where you want to build and see what kind of advice they can give you.

Question: What is a spread in regards to commercial lending?
My husband and I are in the process of purchasing a business. The banker has all the information necessary and has sent the application to underwriting. He said that he should get the spreads back today and will call to discuss, but I don’t know what he means by spreads…can someone explain this?

Answer: My sister worked at a bank & from what she told me was that the spread is a basis of points or a percentage of what the business that you’re buying into produces. The Bank wants to make certain that the amount of cash that’s made from the business is current to the market price.

Question: Commercial Lending?
Does anyone know anything about the Commercial Lending job market? I am interested in learning more about it. Salary ranges, Financial Certifications required, Hours, travel. Also, how does someone break into this career? Entry-level jobs for graduates?

Answer: There are several local banks in my area that have commercial lending departments. Perhaps banks in your area have the same. You could call the bank to inquire as to job opportunities within that area. Salary ranges will depend on where you work (the area), the job requirements and such. I think they start here around $50,000 yr.

Question: How the growth in commercial paper and junk bonds has affected commercial lending and yield spread at banks?

Answer: It’s made their assets worthless, and made it much harder for them to profit on a broad spectrum.

Question: Commercial lending statistic?
Could somebody show me the website which contain the total commercial lending for business and household both by banking industry as well as by dedicated lending firms.

Answer: There are pay sites that might have this data but I don’t know of any that give a breakout like you ask for. The hard part is the specifics on each firm.

Question: Re: commercial lending- what is mezzanine financing?

Answer: Mezzanine loans are similar to second mortgages, except a mezzanine loan is secured by the stock of the company that owns the property, as opposed to the real estate.

If the company (usually a LLC) fails to make the payments, the mezzanine lender can foreclose on the stock in a matter of a few weeks, as opposed to the 18 months it often takes to foreclose a mortgage in many states. If you own the company that owns the property, you control the property.

Mezzanine loans are also fairly big. It is hard too find a mezzanine lender who will slug through all of the required paperwork for a loan of less than $2 million. It is occasionally possible to obtain mezzanine loans as small as $1 million.

Question: What is commercial lending?

Answer: Commercial Lending is lending money for commercial reasons. Commercial = business. It can be to start a business, to buy a building that will become a business, to buy more things for a business. It’s basicall anything that has to do with a business. Anything having to do with your personal life such as your home, car, credit cards is called Personal Lending.

Question: How does Seller Finance and Commercial Lending work together on a deal?
I outlined what I “think” it is below.

Lets say you have a building for 1,000,000 at 6% Interest Only for 5 years. Seller is willing to carry back 80% (800,000). Lender is willing to finance the remaining balance with 20% down (So this equates to 40,000 cash you need to bring to the table) 160,000 is the amount the lender is going to finance. I am assuming that the lender has the first position with his loan and the seller finance goes into the second. What can be done to protect the seller should the buyer default on the loan?

Answer: Well, you’ve got the basic theory down but your execution is a bit flawed. First of all Seller financing can only be done if the seller owns the asset free and clear of any debt (he could have some debt on it but that would make it an AITD and totally different).

The lender would be foolish to allow the buyer to come in with nothing down thus 20% down would make for a vested interest in the property from the buyer. The Seller would then finance the 80% at an agreed upon interest rate usually interest only so as to avoid partial capital gains tax on the principal paid back. There would be no lender involved and the Seller would in effect act as the bank.

Using your illustration then, on a $1,000,000 purchase, the buyer would put down $200,000 and the seller would finance $800,000 at 6% interest only for five years. The Buyer would then make 60 installments of $4,000 and then have a balloon payment of $800,000 due at the end of the 60th month.