Underwater on Your Mortgage?

The housing market is still very unstable.  One month we read that home sales are strong and home prices are rising.  The next month we see that sales are down.  One piece of discouraging news that came out recently was that in the fourth quarter of 2009 another 600,000 homeowners found themselves "underwater" or owing more on their mortgages than their homes were worth.  In fact, the total number of households in this situation is now over 11 million people or 24 percent of all properties that carry a mortgage.  This information, reported by First American Core Logic, a real estate research firm, tells us that many people are still really struggling.

The first choice for many homeowners in this situation is to try to restructure their existing mortgages.  However, this can be a very long and painstaking process and many people find they do not qualify.  As a result, more and more people are thinking about walking away from their existing homes and mortgages.

Aside from the moral considerations, which are great, what are the points you need to consider before you think about walking away from a mortgage?  First, you need to understand this is a huge decision.  It might seem like this option would solve a lot of your problems, but in reality, it generally just adds more. Probably the biggest impact is - you will not be able to get a new mortgage for quite some time — five years being typical.  That means you need to prepare to be a renter for at least that amount of time.

Plus, your credit score and credit record will be adversely impacted for about seven years.  During that time, your ability to get any other kind of loan will be negatively impacted.  Car loans, assuming you can get them, will be at very high interest rates.  Same for any other type of consumer loan.  Finally, there may be adverse tax implications as well.

So, walking away is certainly not without its costs.  If your financial life is going to be impacted for five to seven years anyway, it just might make more sense to hang in there and keep making the mortgage payments.  No one can accurately predict what the real estate market might look in 2015 — perhaps by then your situation could be dramatically different.

7 Ways to Save on Food

Simple tips to help you save on the cost of food.

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Passing Your Home Inspection

If you're getting ready to sell your home, do everything you can to get the house in good condition before you attempt to sell it, but don't be discouraged if the inspection report contains negative statements. Home inspectors make note of everything they see. No home is perfect.

Fix leaks and clogs before the home inspection takes place. The inspector will check water pressure by turning on multiple faucets and flushing toilets at the same time. Appliances such as dishwashers and clothes washers will be tested, too. Leaks and clogs will be apparent during these checks.

The home inspector might check the septic system (if you have one). During one method dyes are flushed down a toilet. The inspector waits to see if the dye surfaces on the drainfield, indicating a drainage problem.

The electrical panel and circuit breaker configuration should be adequate for the needs of the house. A 125 amp electrical panel works for most homes. Individual circuits should not be overloaded.

The inspector will look for receptacles with ground fault circuit interrupters (GFI) in bathrooms and kitchens. These receptacles have little test-reset buttons on them. The home inspector will likely make sure the receptacles are what they appear to be, and not "dummies" that aren't wired to work.

Some of the grounded receptacles (with 3-pronged plugs) will be checked too.

The inspector will check the heating and cooling systems, making sure they work he may add comments about their efficiency. The inspector will take a close look at the structure and foundation. All appliances will be checked. The inspection report will include details about smoke detectors.

Remember that the home inspection report is not a wish-list for buyers. Read your contract carefully–it probably states which systems should be in good working order at closing.

Your contract may also state that you are under no obligation to make any repairs at all–although the buyers can then likely withdraw from the contract. Don't feel you must comply with unreasonable demands for repairs.

Federal Home Buying Support Still Wanted

According to a new poll by the National Association of Home Builders (NAHB), Americans remain strongly committed to federal support for home buyers.

Roughly 68 percent of those polled said the government should continue to support housing, and 65 percent believe the government should be doing more to keep families from losing their homes to foreclosure.

The poll included both home owners and renters and was conducted for the National Association of Home Builders (NAHB) by RT Strategies, a non-partisan public opinion polling firm based in Washington, D.C. RT Strategies interviewed a representative sample of 1,000 adults nationwide by telephone using live interviewers on January 29-31, 2010. The sample included 170 interviews with respondents from cell-phone-only households.

Among those polled, some key groups said the government should continue to play a vital role in maintaining a healthy housing market. For example, 78 percent of all potential home buyers, including 81 percent of renters intending to buy a home in the near future, said the government should continue to support housing.

Roughly 65 percent of home owners said the government also needs to do more to keep families from losing their homes. Support for more foreclosure protection was not confined merely to current home owners.  Among renters, 84 percent said the government needs to do more to helped strapped borrowers. This issue is particularly important to women, with 71 percent supporting greater foreclosure protection, compared to 58 percent of men.

Financial concerns continue to be the greatest barrier to growth in the housing market.  Among renters nationwide who aspire to own their own home, 39 percent simply don't have the money to buy a home at this time, and another 20 percent said the primary obstacle is that they feel they cannot qualify for a loan. Larger economic issues also play a role, as 18 percent said that job security is the greatest obstacle they face in trying to buy a home.

We'd love to hear from you in response to this survey. Do you think the government should be doing more to keep families from losing their homes to foreclosure? What about government assistance in buying a home, such as the first time home buyer tax credit? Let us hear from you by clicking on the comment link below.

Taxes: Most Common Mistakes

With tax time here again, here are some of the most common mistakes people make while doing their taxes. Avoid these to save yourself money, and a possible audit.

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