With the economy in misery, most of us don't know what to do when it comes to real estate. Is this the time to buy, or sell, or do nothing at all? Real estate expert Barbara Corcoran addresses the top five issues that have people panicking.
Q: I just can't meet my monthly payment anymore but I want to stay in my home. What can I do?
A: First, try to renegotiate with your lender to lower your monthly payment. Pick up the phone and call your lender's workout department and speak with a vice president because only an officer has the authority to make a decision about your loan. Have a list of your income and expenses at the ready and explain why you can't meet your monthly payments. You won't get an immediate answer, so you should follow up with a certified letter explaining the same. Today, roughly half of the lenders will restructure your mortgage if you can plead a good case of hardship. Remember the last thing a bank wants is to own your home, so don't even think about leaving until you've talked to your bank.
Also, there's now new FHA financing available that can extend a mortgage to as long as 40 years. If you could extend the term of your loan, you could bring down your monthly payment substantially.
Q: I don't understand how the new housing rescue bill will help me out of an adjustable rate mortgage with a rate that keeps going up. Can you explain?
A: Good news! The new housing bill provides help for homeowners with an ARM who can't afford their higher payments. Here's how it works. The FHA replaces your existing mortgage with a 30-year fixed-rate mortgage. They'll give you up to 90 percent of your home's current value. So for example, if you bought your home for $300,000 and it's now worth only $200,000, the FHA will give you a mortgage for $180,000 in place of your old ARM reducing your monthly payment by a lot. The kicker is, once you sell your house you'll have to give 50 percent of your profit back to the FHA. But for a homeowner in distress, at least you get to keep your house and lowered your payments to something you can afford.
Q: My mortgage will reset in three months and I may not be able to make the new payments. What should I do?
A: Chances are good your payments may actually go down! Right now the indexes ARMs are based on are so low, that most adjustable rate mortgages won't change and may even go lower. But don't waste three months being nervous. Talk to your lender or a mortgage broker now. You might also consider an even better option, which is to convert your ARM into a fixed rate mortgage. You'll have some closing costs, but even if your current mortgage is only a half point higher than what you could get on a fixed rate mortgage, it makes sense to make the change. Besides, most people with fixed rate mortgages sleep better at night.
Q: I need to sell my home immediately and I'm worried about selling at a big loss. Is there anything I can do to soften the blow?
A: If you want to sell your house immediately, the only way to do it is to really slash your price. With everything going awry in the economy right now, most buyers have decided to sit this one out on the sidelines. The only thing that will get them off the fence is a house that's too good to be true! And that's the house priced a hefty 15-20 percent below every other house out there. It's not easy to take a loss, but keep in mind if you're planning to buy another house, you'll be able to get that one at a discount too.
Q: Should I buy, or should I keep renting until things calm down?
A: Most people are more comfortable waiting until things calm down. But the smartest buyers are out shopping now because they know the best time to get a great deal is when things are most uncertain. And what's more uncertain than right now? Sure, buyers are frightened about what's going on, but the sellers are even more frightened! That means sellers are more receptive to the low bid they wouldn't even consider a few months ago. Now is a great time to over-reach and get the house you couldn't afford last month.