AVOIDING FORECLOSURE: What every homeowner should know.

No one buys a home hoping to get behind on payments and have the bank


foreclose on it. Here are a few tips to avoid this problem altogether, and

what to do if it does occur.

Don’t set yourself up for failure

There are two main ways to avoid foreclosure:

• Don’t put yourself in a situation where you won’t be able to afford


your mortgage. Know how much you can really afford before you start

shopping for a home and stick to that price range. Often, people

over-extend themselves financially when in reality they don’t and won’t

have the means to pay their mortgage payment. Just because the

mortgage lender approves you for a loan at a certain amount doesn’t

mean you can actually afford the payments on that loan.

• Understand your loan. Many people get into trouble because they don’t

understand their responsibilities regarding their home loan. There are

many types of loans where the payments for the first year or first few

years are much lower than the amount you will pay in the following years.

Talk with your lender about various loans and make sure you understand

how much your payment will be at the beginning as well as what your

payment might be in the future.

What to do if you think you’re heading toward foreclosure

Do not be embarrassed. Instead, contact your lender as soon as you’re

aware that your payment will be late. Also, never ignore your lender’s

phone calls or letters. If you act uninterested in the fate of your home, your

lender will be less willing to work with you in remedying the problem.

If you don’t want to speak to your lender first, you can contact a

HUD-approved counseling agency that will work with you and your lender

to negotiate a repayment plan. You can call 800/569-4287 for the

counseling agency nearest you.

Another source, the National Foundation for Credit Counseling, can help

you locate a nonprofit agency that could help you reduce your monthly

payments by lowering interest rates or extending repayment periods. Stay

away from companies that promise you swift, effortless results by paying

them a large fee—this is usually evidence of a scam.

You can also speak to your Texas REALTOR®. Your REALTOR® understands

the entire homebuying process and can discuss options available to you.

Avoiding foreclosure

What every homeowner should know

This information is brought to you by a proud member of the Texas Association of REALTORS®. Whenever you buy, sell,

or lease real estate, make sure your agent is a REALTOR®.

© 2007 by the Texas Association of REALTORS®. All rights reserved.

ACCESS A HOME'S SECURITY...Look at every home through the eyes of a burglas.

The Federal Bureau of Investigation reports that 2.1 million burglaries were


committed in 2004. Not all of these situations involved forced entry; many

were the result of unlocked doors and windows. Once you close that

loophole, though, how can you determine if one house is more vulnerable

than another? Well, a residence surrounded by a 15-foot electric fence and

patrolled by guard dogs might be a giveaway, but here are some

more-subtle ways to judge a house’s security.

Entrances should be visible and the exterior well-lit. Thieves don’t like to

be seen. If a home’s doors and most-accessible windows are visible from

the street or a neighbor’s house, they might look for another home. Most

homes have outside lights; make sure those lights are positioned correctly.

Lighting up the front door and driveway is great, but what about the dark

corner of the yard near the living-room window? Use motion-sensor lights

in these areas.

Exterior doors must be metal or solid-core wood. A particle-board or

similarly weak door will break long before most locks give out.

All exterior locks should have dead bolts with metal strike plates. Dead

bolts alone don’t deter burglars. Without a heavy-duty metal strike plate

screwed in the door frame to receive the lock, someone could break open

the door by busting through the wood.

Watch for old sliding-glass doors. Old doors with worn-out rollers can be

lifted off the track, bypassing any lock.

Any fence gates should have locks. Yes, burglars can climb over most

fences, but they risk more exposure by scaling a fence instead of quickly

walking through a gate.

Look for “painful” landscaping. A good way to discourage a thief from

breaking in through a first-floor window is to install a rosebush or other

thorn-covered plant under it.

You can’t keep a determined, professional burglar out of a home. However,

you can make it less appealing for him to try.

This information is brought to you by a proud member of the Texas Association of REALTORS®.

Whenever you buy, sell, or lease real estate, make sure your agent is a REALTOR®.

© 2005 by the Texas Association of REALTORS®. All rights reserved.

For more information about Texas REALTORS® or buying or selling a home in Texas,

visit TexasRealEstate.com.

revised 11/07/05

GLOSSARY OF REAL ESTATE TERMS

Agent - An individual who represents a seller, a buyer or both in the purchase or sale of

real estate. Since the commission for the sale of a house is almost always paid for by

the seller, buyers are able to get assistance and information from Real Estate Agents,

usually at no cost to them. It is for this reason that the vast majority of homebuyers

employ the services of an Agent for their purchase. In addition, since most houses are

listed by Real Estate Agencies, it gives them the maximum number of available

properties to consider.

Amortization - The schedule of loan payments that establishes the amount of payment

to be applied to the principal and the amount to be applied to interest, usually on a

monthly basis, for the full term of the loan.

Annual Percentage Rate (APR) - The TOTAL interest rate of a mortgage, including

the stated loan interest as well as any upfront interest paid in securing the loan. The

APR will invariably differ from the mortgage rate quoted due to the inclusion of these

items.

Appraisal - An estimate of value of a Real Estate property by a professional third party.

Virtually all non-owner financed mortgages will require an appraisal and is generally paid

for by the buyer.

Adjustable Rate Mortgage (ARM) - A mortgage in which the Interest rate is

adjustable, meaning that the rate can go up or down according to prevailing financial

market conditions. Probably one of the reasons that buying a home is such an emotional

experience is because of the fact that not only do you have the actual house buying to

deal with, but for most homebuyers you also have the mortgage process to encounter.

This can be a smooth and almost uneventful process, or an unnerving one. A great deal

depends on the preparation of the buyer as well as the selection of an efficient mortgage

company.

Assessment - The value of a property as determined by the local tax jurisdiction which

is used to determine the amount of your property taxes.

Buyer's Agent - A Real Estate Agent that has made an agreement to represent the

buyer exclusively, rather than the seller. The Agent, unless specifically disclosed

otherwise, represents the seller in any transaction for the sale of a home. It is that

Agent's fiduciary duty (where their loyalty lies) to protect the seller's position at all

times.

Buyer's Agency, however, may be an option available to you. Simply put, it allows the

Agent with whom you are working to be your representative and to put your interests

above all others.

Comparable Market Analysis (CMA) - A comparison of the prices of similar houses

in the same general geographic area. A CMA is used to help determine the value of a

property, either for a seller or a buyer. A Comparable (or Comparative) Market Analysis

is developed by an Agent to compare similar properties in the same general

neighborhood. It is an essential tool when attempting to determine the market value of a

specific home.

Closing - The process that affects the final transfer of the deed from the seller to the

buyer, as well as finalize all aspects of the mortgage of the property. After the searching

for a home is done, the negotiations have been completed, the house has been

inspected, and the mortgage has been applied for and committed to, the focus suddenly

turns to the Closing, Settlement, or Escrow as it is known in some localities. For

simplicity, in our discussions here we will refer to the process when it all comes together

and you finally own the home as Closing. An understanding of the elements of and

players in the closing, as well as a concise preparation for it, will eliminate many nervous

hours as the day approaches.

Closing Costs - Funds needed at the time of closing (separate from and in addition to

the down payment). Loan origination fees, discount points, Attorney fees, recording fees

and pre-paids are some items that may be included. They often will total from 3% to 5%

of the price of the home, payable in cash (cashiers check).

Contingencies - These are conditions-or "safety valves" written into Real Estate offers

and contracts to prevent a buyer from being forced to buy a house that is unsatisfactory

either structurally or financially. Examples of contingencies are "This contract is subject

to the buyer obtaining a satisfactory whole house inspection." or "Subject to the buyer

being able to obtain a mortgage."

Condominium - Housing where the owner owns only the unit in which they live-from

the interior walls inward, generally-as well as a portion of the common area.

Debt to Income Ratio - The ratio of a borrowers total of debt as a percentage of their

total gross income.

Deed - The document that, when recorded with your local government, determines

ownership of a property. Transferred from seller to buyer at closing.

Dual Agent - A dual agent is a real estate agent who has signed a buyer agency

agreement with a buyer who wishes to purchase a listing held by the agent or the

agent's firm. In states where dual agency is allowed, it must usually be agreed to by all

parties in writing.

Earnest Money - Money that is submitted with an offer to purchase which indicates a

buyer's seriousness and good faith. In virtually all cases, earnest money will need to be

submitted at the time of the offer and remains in escrow until the time of closing, at

which time it becomes part of the downpayment.

Equity - The difference between the value of a property and the total of any outstanding

mortgages or loans against it.

Escrow - Funds held in reserve both prior to closing (for example the earnest money

and deposit) by a third party and after closing by the mortgage company to pay future

taxes and homeowners insurance. In some areas, "escrow" also refers to the closing

process.

Fixed Rate Mortgage - A mortgage loan where the interest rate is established at its

origination and continues unchanged through the life of the loan.

FSBO (For Sale By Owner) - Real Estate that is sold without the assistance of an

Agent. FSBO can refer to both the individual selling the property "They are a FSBO," or

the property itself "that house is a FSBO."

Foreclosure - The process through which a lender takes back property from a

defaulting owner and re-sells it.

Homeowner's Association - An owners group, whether in a condominium,

townhouse or single-family subdivision that establishes general guidelines for the

operation of the community, as well as its standards.

Inspection - A whole house inspection of a home being considered for purchase that

looks for defects in the property.

Interest - That portion of a mortgage payment that is the "charge" for the using the

lender’s funds.

Lien - A legal claim against a piece of property that can prevent it from being sold

unless the lien is satisfied (paid off). Liens can be filed by unpaid contractors or other

debtors in a legal process so that they will be paid when a property is sold.

Listing - A property for sale by a Real Estate Brokerage and Agent.

Listing Agent - The person who has obtained a listing of real property to act as an

agent for the compensation to sell the property or find or obtain a buyer.

Loan Origination Fee - A charge imposed by the lender, payable at closing, for

processing the loan.

Lock-in - An agreement by the lender at the time of mortgage application or shortly

thereafter, to write the mortgage at a specific interest rate, whether rates rise or fall up to

the date of closing. Obviously a good move if rates are rising, not so good if they are

falling. Lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future.

LTV (Loan to Value) - The ratio of the amount of the mortgage as a percentage of the

value of the property.

MLS (Multiple Listing Service) - A listing (almost always computerized) of all the

properties for sale by Real Estate Brokerages in a given geographical area.

PMI (Private Mortgage Insurance) - Required on virtually all conventional loans with

less than 20% downpayment. Although the payments for PMI are included in your

mortgage payment, it protects the lender should you default on the loan. On FHA loans,

you will pay a MIP (Mortgage Insurance Premium), which accomplishes the same

purpose.

Points - 1 point is equal to 1% of the loan value, paid at closing. Points can be loan

origination fees or "discount points" which reduce the interest rate of the loan (you are

actually paying a finance charge up front). When a lender, for example, quotes a rate of

8 1/2% with 1 + 1 points, 1 point is for the origination fee and 1 point is for the discount

fee.

Prequalification - The first stage of a mortgage application where the lender will run a

basic credit report and determine your debt to income ratio in order to see how much

mortgage you qualify for.

Pre-paids - Paid for (in cash) at closing for such items as homeowners insurance for

one year and real estate taxes for several months.

Principal - The amount borrowed for a mortgage loan. Your monthly mortgage

payment will be applied to both the interest and the principal (be assured, though, that

the lions share will go to the interest portion in the first years of the loan).

Property Tax - An annual or semi-annual tax paid to one or more governmental

jurisdictions based on the amount of the property assessment. Generally paid as part of

the mortgage payment.

Recording - The act of entering deed and/or mortgage information into public record

with your local government jurisdiction.

Selling Agent - This term includes (1) a listing agent who acts alone to sell a listing

that he or she obtained; or (2) an agent who acts in cooperation with a listing agent and

who sells or finds a buyer for the property; or (3) an agent who has located a property for

a buyer for which no listing exists and presents an offer to purchase to the seller.

Generally speaking, the selling agent is the person who works with the buyer.

Title Insurance - Protects your title: your ownership rights, from claims against it. Paid

at closing, title insurance may be the responsibility of the buyer, the seller, or both,

depending on what is traditional in your locality.

Warranty - Covers either most of the house in a new home, or selected items (for

example the heating and air conditioning system or the water heater) in a used home.

Warranties can vary widely and are optional in used homes (paid for by either the buyer

or the seller).

Zoning - Laws that govern specifically how a zoned area can be used. For example, an

area may be zoned for single family residential, condominiums, commercial or retail, or a

mix of two or more uses.

"All information in this report is deemed reliable, but not guaranteed."

© 2005 PropertyMinder, Inc.

Questions Buyers Should Ask A Mortgage Lender.

There is a lot more to the mortgage process than getting a good rate. High


costs in fees and poor service can come as very unhappy surprises.

Here’s a list of suggested questions you might ask a lender:

• How large is your company, and how long has it been in business?

• Are you a licensed mortgage broker or loan officer in Texas?

• Is your company a mortgage banker or a mortgage broker? (A banker

lends its own funds; a broker searches mortgage sources and arranges for

you to receive financing from the lending entity.)

• What is the name, phone number, and e-mail address of the person who

will actually be processing my loan application? How accessible is that

person?

• Tell me about all loan fees. What fees must I pay up front? What fees will I

have to pay at closing?

• How can you assure me I won’t pay any unnecessary “add-on” fees?

• Do the costs you are quoting include the lender origination fee?

• Are there loans available with no origination fees? No closing costs?

Reduced closing costs?

• What are your interest rates?

• Is there a fee to lock in my interest rate? How long can I lock in the rate? If

interest rates go down, can I relock at the lower rate? If so, will there be a

fee for that?

• What information must I provide to get a mortgage loan?

• What documentation will I have to provide?

• Will you require current tax returns? (Take note of this especially between

Jan. 1 and April 15 if you haven’t prepared your return yet.)

• How long will it take to get complete and unequivocal loan approval and be

ready to close?

• I plan to stay in this house for ___ years. Can you show me the breakdown

of any ARM loans you offer vs. fixed-rate loans to see which could save me

the most money in my situation?

• What is private mortgage insurance? Other than a 20% downpayment,

how can I avoid the private mortgage insurance?

• In the last three months, how many loan applications have you taken and

how many have you been unable to close?

• Can you give me names and phone numbers of two or three people for

whom you’ve funded loans in the last two months?

Currently, Texas-licensed mortgage brokers must use the standard

Conditional Qualification and Conditional Approval letters when representing

that an applicant is prequalified or preapproved for a mortgage loan.

Mortgage bankers may be required to do so in the future.

Secrets to Buying the Best House for Your Money

Secrets to Buying the Best House for Your Money


1. Get "Pre-Approved" - Not "Pre-Qualified!"

Do you want to get the best property you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one element in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.



In years past, I always recommended that buyers get "pre-qualified" by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you "pre-qualified" and issues a certificate that you can show to a seller. Sellers are aware that such certificates are WORTHLESS, and here's why! None of the information has been verified!



Many times unknown problems can come to the surface! Some of the problems I've seen include recorded judgments, alimony payments due, glitches on the credit report due to any number of reasons both accurately and inaccurately, down payments that have not been in the clients' bank account long enough, etc.



So the way to make the strongest offer today is to get "pre-approved". This happens AFTER all information has been checked and verified. You are actually APPROVED for the loan and the only loose end is the

appraisal on the property. This process takes anywhere from a few days to a few weeks depending on your situation. It's VERY POWERFUL and a weapon I recommend all my clients have in their negotiating arsenal.





2. Sell Your Property First, Then Buy the House

If you have a house to sell, sell it before selecting a house to buy! Contingency sales aren't nearly as strong as one that comes in with a ready, willing and able buyer. Consider this scenario: You've found the perfect house - now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that this is a risky deal, since he might pass up a buyer who DOESN'T have to sell a house while he's waiting for you. So he says OK, he'll do the contingency but it has to be a

full price offer! You have now paid more for the house than you could have because of the contingency, and you have to sell your existing house in a hurry! Otherwise you lose the house! So to sell quickly you might take an offer that's lower than if you had more time. The bottom line is that buying before selling might cost you THOUSANDS of dollars.

3. If you're concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market.



Another tactic is to make the sale ''subject to seller finding suitable housing''. Adding this phrase to the listing means that WHEN YOU DO FIND A BUYER, you will have some time to find the new place. If you

don't find anything to your liking, you don't have to sell your present home.



Before house hunting, make a list of things you want in the new place. Then make a list of the things you don't want. You can use this list as a guide to rate each property that you see. The one with the

biggest score wins! This helps avoid confusion and keeps things in perspective when you're comparing dozens of homes.



When house hunting, keep in mind the difference between ''STYLE AND SUBSTANCE''. The SUBSTANCE are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. The STYLE represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good SUBSTANCE, because the STYLE can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant.



Consider each house on its underlying merits, not the seller's decorating skills.





4. Don't Be Pushed Into Any House

Your agent should show you everything available that meets your requirements. Don't make a decision on a house until you feel that you've seen enough to pick the best one.



A decade ago, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice

at the time. Today there isn't always this urgency, unless a home is drastically underpriced, and you'll know if it is.



Don't forget to check into the SCHOOL DISTRICTS of the area you're considering.

Tips for Buying A Home: When Checking Out A House, Leave Your Emotions At Home.

Homebuyers often follow their hearts, and they should. Sometimes just going


with a gut feeling is the best indicator. But when it’s house-touring time, it’s

important to set those emotions aside and replace them with clear-headed

thinking and a critical eye. Otherwise, your potential dream house might just

turn into a money pit.

Although you should always hire a professional inspection before you

complete the sale, you can spot the more obvious trouble signs early in the

process simply by knowing what to look for. You can quickly check five key


areas to determine if the home has serious problems.

Roof. A new roof can cost between $5,000 and $15,000 depending on

the type.

• A quick method to determine if the roof is leaking is to look in the attic.

WARNING: Don’t climb into the attic yourself, unless you know how to

walk on joists; you might step through the ceiling and injure yourself.

Simply open the attic access panel and look inside.

• With a flashlight, check the rafters. They should not show water stains,

which indicate leaking.

• With the flashlight off, look up at the roof. Any pinpoints of light shining

through indicate a worn roof.

Foundation. A cracked foundation is a serious matter. It can cost tens of

thousands of dollars to fix, and, in severe cases, may not be fixable. Keep an

eye out for these potential warning signs:

• V-shaped cracks (larger at the top than at the bottom) around the

perimeter of the house.

• Cracks in interior walls near corners of doors or windows. Look at all the

corners of windows and doors, and at joints where walls meet walls,

ceilings, or doors for signs that they are pulling away from each other.

• Doors that stick and squeak.

• Leaks and cracks in and around the fireplace.

• Obvious cracks in brick and mortar.

Piping. Copper piping rarely corrodes and is the plumbing of choice these

days, but many older homes have galvanized steel plumbing. After 30 years or

so it tends to rust out and leak. Replacing it can cost $5,000 or more, so it’s

something you’ll want to watch out for. Call a plumber if you have specific

questions.

Flooding. If a house is poorly situated on its lot, flooding can occur under the

house, which can seriously damage the home.

• In the basement, check for water stains on the foundation indicating flooding

during rainy periods. If you find these, call in a soils engineer to confirm the

problem and suggest solutions.

Unapproved work. All improvements to the property should have been done

with permits from the local building department. Work done without permit

may be substandard and, if discovered later, may need to be ripped out.

• Go down to your local building department and request copies of permits

for all work that was done at the property address. Compare these with any

additions or replacements done by the seller. If work was not done by

permit, you may ask the seller to obtain permits for the work and bring it up

to building-code standards before you purchase.


This information is brought to you by a proud member of the Texas Association of REALTORS®. Whenever you buy, sell,

or lease real estate, make sure your agent is a REALTOR®.

© 2004 by the Texas Association of REALTORS®. All rights reserved.