See my Blog

• Kentucky Bar Association
• Louisville Board of Realtors
• Home Builders Association of Louisville

• Appraisals Up with Housing Market Volatility
• New Rules in Play for Appraisals
• Facing complex market, fewer going the FSBO route
• FSBO vs. Agent: Are You a FSBO Candidate?
• Loan Modifications Coming Due
• Tips for Louisville Sellers Going FSBO
• Options for Preventing Foreclosure
• Review of Purchase, Contingency Agreements

Real Estate FAQs

I have a $41,000 mortgage at 8.6%. I want to refinance for a lower rate of around 4%. The property is worth half of the mortgage balance. FICO scores are 712 and 715. Will anyone refinance my underwater mortgage?

Probably not a refinance. But, you may still have options. Lenders will want to make sure that the loan is fully secured by collateral. Another problem is getting a loan that small, even if fully secured. But you can still call the lender and see if it will work with you on a loan modification or internal refinance. You may want to look at less traditional refinancing, such as from a family member. Even at only 4% interest, it is probably a lot more than a relative is getting on their Certificate of Deposit. We can draw up the paperwork.

I am a veteran and I previously used my VA home loan benefit. I am looking to sell my home and buy another one. Can I get another VA home loan?

Yes. Many think that your VA home loan benefit is a one-time thing. But you can use this benefit again and again. Veterans can obtain a loan for 100% financing with no need to pay extra for mortgage insurance like other low-down-payment loans. There are other favorable terms, such as limitation on fees that can be charged to the veteran. You can reuse this benefit as long as your prior loan was paid in full. Typically can be used for loans up to $417,000, but lenders will sometimes go beyond that limit. Also, if you still are using part of your $417,000 benefit, you may still be able to use the remainder on another house, as long as you intend to live in the new home. In the current lending environment, a VA loan may be the easiest type to obtain.

I own an investment home that is underwater. I am current on my payments because I have a renter. But it will take decades for me to break even in a sale. I tried to talk to my lender last year, but they're unwilling to work with me. What can I do?

A short sale is your best answer. You need to take a deal to your lender to approve -- not just ask if they'll approve something vague. Lenders are afraid that if they make it too easy for borrowers, they will have a landslide of requests for short sales. So, they tend to deal only with people who have an apparent need and have committed to the process of selling their homes. Talk to us if you need an expert on short sales. Then you need to find an able buyer and submit your financials to the bank, along with the listing, contract and all of the other required documentation.

Last year, I failed to pay my property taxes and my lender paid the tax on my behalf. Now my lender is threatening to foreclose on my home if I do not pay back the money. Can they do this?

A: Yes. A mortgage is a security instrument in which your lender has the right to foreclose on the collateral (your house) if you fail to live up to the conditions of the loan and various agreements that you signed at the closing. So, besides monetary obligations to your lender, you must protect its collateral by paying insurance, property taxes and homeowners association dues, etc. A breach of any of these promises that you made to your lender can trigger a foreclosure, but generally they simply want to be paid back, with interest.

What happens if you want to short sale your property but you also have a home equity line of credit or other second mortgage on your home?

It just means you have twice the work. You will need to get both your first mortgage lender and your second mortgage lender to agree to the short sale. A home equity line of credit is a second mortgage and will need to be dealt with.

What are the upsides and downsides of a short sale?

A short sale is when you sell your home to a third party at market value and get your mortgage lender to agree to release the property from the mortgage lien even though the lender is accepting less money than it is owed. The upsides: you avoid being sued in a foreclosure lawsuit or having a judgment against you; you are reducing or even eliminating the debt you owe your bank; you get out of maintaining and keeping a property you no longer want or need and your credit may take less of a beating than in a foreclosure. The downsides: you will take a credit hit; a short sale can be a lot of work and can be confusing; and you will lose your home and have to find another one.

What are the pros and cons of a reverse mortgage?

A reverse mortgage is also known as a lifetime mortgage. This means your lender gives you the money and you never have to pay it back while you are alive, as long as you stay in the home. When you move, die or sell the home, the mortgage will need to be paid back in full. You must be at least 62 years old to qualify. The most common is the Federal Housing Administration-insured HECM loan. The pros of a reverse mortgage include: credit is not considered, so bad credit is ok; no monthly payments; no income requirements (except to show you can afford the other costs of ownership such as taxes and insurance); the fact that you can stay in the home without fear of repayment or foreclosure as long as you live; and the loan is considered non-recourse, meaning the lender can collect only the value of the home. Cons include: high up-front costs; hard to understand and many people are concerned that they will use up all of the equity in their homes and therefore not be able to leave a legacy to their children. Reverse mortgages can be beneficial to senior citizens, as long as they are not concerned with leaving a legacy and are not planning to move in the next five years or so.

I found the perfect house, but it needs a new roof. I don't have enough money to make the down payment on the house and fix the roof and the seller will not fix it. Should I move on?

You should ask your lender about a 203(k) rehab loan. The Federal Housing Administration has a program in which it will insure a lender that lends you extra money to not only purchase your home, but also to fix it up. First you will have to make sure that your lender is FHA-approved and that it offers this loan program. For a condo, it must be an owner-occupied unit. The process is somewhat involved so you will want to make sure that you are working with someone who has experience with this type of loan.

Last year when both my mortgages were in default, the lender on my second mortgage sent me a settlement offer of 10 percent of the original balance. By the time I replied, they said my offer was too low.

Keep trying. When you were in the position of being in default on both your mortgages, the second mortgage lender was in the position of getting nothing, so anything was appealing. Now that it knows you are invested again in your home, the second mortgage lender will feel that it is in a more powerful position to bargain. If you did not take the offer while it was valid, there is nothing you can legally do to get the offer back. But the people who get the best deals are the ones who keep trying.

I'm thinking of trying a short sale. If I'm successful, does that mean I won't owe the bank any more money?

Not necessarily. In a short sale, you would contract with a buyer to purchase your home and then negotiate with your lender to release its mortgage lien for less money than what is owed under the note. Hopefully, the bank will release you from paying back the remaining balance. But you should strive to get this in writing before agreeing to anything. The bank may let you do a short sale, but it still can come after you for the remaining balance unless, of course, it waives that right.

If we are current on our mortgage, but expect to get behind and be underwater in the future, should we consider a short sale now?

The answer is often "yes". Lenders have programs in place for short sales but they won't be around forever. Some are supported by government programs that also have a shelf life. Also, the IRS is waiving gains caused by mortgage loan forgiveness on your homestead, but this expires at the end of 2012. Finally, most expect that interest rates will not hold at these low levels for long. BUT, just remember that no one can adequately advise you until all your circumstances have been thoroughly evaluated.

I am behind on my homeowner association dues. Am I personally liable for the unpaid dues, attorney fees, etc.?

Yes. Your association can move against your property for the payment of dues and related costs. More likely than a foreclosure, your association can sue you personally. If your mortgage is underwater, your association may obtain a money judgment to execute against your other assets or even garnish your wages.

Attempts at loan modification have been denied and my housing counselor said it seemed like I make enough money to afford the payments. I am helping to support an aging parent and short on cash. What are my options?

Typically, when mortgage lenders look at your situation to determine if you qualify for reduced payments they want to know whether your housing payment - principal, interest, property taxes and homeowners insurance - is more than 31 percent of your gross income. If the payment is under that benchmark, your mortgage payment is considered affordable and you will not be offered reduced payments. Unfortunately, regardless of your circumstances, the lender expects your mortgage payment to be your first priority. You must be able to convince your lender that the situation is temporary and can be eventually resolved.

I am trying to renegotiate the terms of my loan, but I may have to file for bankruptcy. Can a bank ever come after you for the remaining balance once the debt has been discharged in bankruptcy?

Only if you agree to it, then stop paying. This means that if you do enter into a loan modification with your lender and later breach that agreement, it may be able to enforce the debt again. However, if you are simply negotiating with your lender, the debt remains discharged.