After years of overbuilding, over-investing, quick-flipping, and credit over-extension, we are now facing the real estate crisis - a crisis which has been created due to our own faults. As a result, the real estate market has been re-priced. Now, it’s high time that we go back to the fundamentals of mortgage and follow them to save ourselves from further crisis.

Here are 5 tips which you may consider before you take a mortgage for your dream home:

Down-payment: If you are planning to buy a property, it would be a smart move if you start saving from today. A large down-payment of around 20% will help you in getting better interest rates and lower payments. You will also be able to build some quick equity in your property and thus can refinance the loan at a lower rate in the future.

Long term loans: This is not a good time for buying a property for quick flipping. No one knows when the real estate market would be revived. Venture into the real estate market only if you want to stay in that property for a longer period of time.

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New set of credit card reforms have been announced by the federal regulators which will come into force from July 1, 2010. The new set of rules will give the credit card users more time to pay their monthly bills, greater advance notice of changes in credit card terms, to avoid retroactive interest rate increases on existing card balances. Apart from this, credit card users will have fewer penalty fees, late charges and interest payments.

Highlights of the new credit card reforms:

Check out the highlights of the new credit card reforms as given below.

• Time limit for monthly bills: Credit card holders will get a reasonable time limit to make their monthly payments. Credit card issuers cannot change the due date without notice. Monthly bills should be delivered to the card holders at least 21 days before the due date.

• Universal default: The concept of “Universal default” should be done away with. Some large credit card issuers have already discontinued this practice.  It is the practice of raising interest rates on customers based on their payment records with other non-related credit issuers.

• Interest rate hikes: There would be limited conditions where the credit card issuer can increase the interest rates.  In case of new transactions, interest rates can increase only after the first year. Also the credit card issuer will have to give 45 days’ advance notice of the change.

• Due dates and times: Credit card issuers cannot set arbitrary deadlines for payments. Early morning due dates should be avoided by the credit card issuers.

• Highest interest balances paid first: Cards with highest interest rates should be paid first or divided on a proportional basis. Right now card issuers apply all amounts over the minimum monthly payments to the lowest-interest balances first.

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The Obama administration has come up with new guidelines for the foreclosure prevention program. It concentrates mainly on how to deal with borrowers who have home-equity loans or other second mortgages.

Most of the borrowers who are delinquent on their mortgage payments also have a second mortgage. However, when the Government announced the $75 billion program to stabilize the housing market, it didn’t concentrate on the question of second mortgages. Thus, the Government has come up with the revised plan which makes it necessary for the lenders to modify the second mortgage when the first mortgage is reworked. The lender’s benefit is that the government will share in the cost of reducing the interest rate on second mortgages for 5 years or it will pay the borrowers to extinguish that debt.

Lenders who will modify 2nd mortgages will receive an upfront payment of $500 and additional payments of $250 a year for up to three years for successful modifications for second mortgages. Apart from this, the borrowers who will be current on the modified loan would receive payments of $250 a year for up to five years. This would be used to pay down the balance of their 1st mortgage.

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This year borrowers will be receiving special tax breaks for refinancing. Most of us overlook the tax breaks available when we refinance our mortgage. You can get special tax breaks on the following:

PMI premiums: Private mortgage insurance or PMI comes into the play when you are unable to pay 20% equity in your home as down-payment. If you have taken out a loan in 2007 or later, you’ll now be able to deduct premiums for loans. The best part is that, this rule applies not only for private mortgage insurance but also for premiums paid for mortgage insurance provided by the Department of Veterans Affairs, the FHA and the Rural Housing Service.

Suppose you took out a loan before 1st January, 2007. You must be thinking that you won’t qualify for the tax breaks. However, if you refinance the loan now, you can take advantage of the tax breaks. But, it should be noted that this deduction is available only to taxpayers who itemize their deductions. The write-off will expire at the end of 2010.

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The faulty mortgage practices which damaged the economy and financial markets round the globe will now face tighter restrictions. H.R. 1728, Mortgage Reform and Anti-Predatory Lending Act would take steps to make sure that the borrowers avoid mortgages which are costly so that they can pay back their creditors and receive better disclosures.

Most of the Consumer Advocates are happy with this new Act as they feel that the stricter rules are necessary to protect consumers as well as the economy. This legislation will, henceforth, see to it that the consumers have the ability to repay mortgages and prohibit reimbursement for indulging consumers into risky loans

But there are some people who have certain concerns about this Act. Some people think that this Act will limit borrowers’ access to loans and increase prices. However, it is noted that the credit risk retention requirement will help the lenders in making safe-harbor loans which is less risky for consumers.

Some of the experts are of the opinion that the bill can be very helpful provided it allows enough room for state laws to prevent abuses and limit preemption by federal standards.

It has been noticed for quite some time that the mortgage rates have been incredibly low. It has tempted a number of people to refinance or buy their first home. But it’s really doubtful whether everyone would qualify for the lower rates or not. There are lots of factors which one has to consider in this regard. Some of these are mentioned below:

Can everyone get a mortgage with a low rate?
It is not necessary that everyone would get a lower rate like 4.78%. It should be kept in mind by the buyers that it is average rate. It should not be considered as the standard rate.

Another important thing which most of us don’t know is that a rate can change several times during a day. This is due to fluctuations in the market. Thus, you’ll note that mortgage rates are 5.5% in the morning but has increased to 5.75% in the evening.

Loan rates can also vary depending upon the loan type. Thus, a 15-year fixed-rate mortgage may have a lower rate than a 30-year fixed mortgage. Mortgage rates also vary due to the size of the loan. If you are planning to take a “jumbo loans”, be ready to pay higher interest rates.

Are there other factors which may not allow me to get lower rates?
Yes, there are other factors as well which may prevent you from getting a lower rate. Your credit score is one of them. If you have a credit score of around 800, lenders will be glad to offer you attractive rates. On the other hand, a borrower with a credit score of 650 will not get good rates from the lenders. Rates will also depend upon the amount of loan you want to take compared to the cost of the property. If you take a loan less than 80 percent of the home’s value, then, you can expect to get better rates.

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Last week, the fixed mortgage rates fell again as the Federal Reserve planned to buy the mortgage backed securities. It was noted that rates for 30-year fixed home loan had declined to 4.80 %. On the other hand, the 15-year fixed rate was unchanged at 4.48%.

In an announcement on March 18th, the Federal Reserve said that it would purchase as much as $750 billion of additional mortgage-backed securities from Fannie Mae and Freddie Mac. This declaration resulted in record low rates for fixed mortgages. As the mortgage interest rates are falling to a record low, it will stimulate the buying of homes.

In the last week, due to lower rates, the number of mortgage applications in the U.S. rose. Moreover, refinancing applications also increased due to the falling of the mortgage rates. Thus, the lowering of mortgage rates is giving a positive boost to the real estate market helping it to come out of the present crisis.

This is a common question which homeowners, who are upside down on their mortgage, ask in the forums. Recently, the Obama administration has come up with 2 types of programs which would make mortgage affordable around 9 million homeowners: refinancing and loan modification.

Special refinancing program: This is a special program which will help people to refinance their mortgage into cheaper loans. It is also known as Home Affordable Refinance. To qualify for this program, your loan must be backed by Fannie Mae or Freddie Mac. Moreover, the first mortgage on your home cannot exceed 105% of the current value of the property.

Loan-modification program: The loan modification program is designed for those who do not qualify for the special refinancing program. The modification must take place by December 31st, 2012. Lenders can reduce the interest rate of the borrowers to as low as 2%. They can even extend the loan term to 40 years. As the lenders modify the loan terms of the borrowers, the government will provide them with incentives for this.

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If you are upside down on your mortgage and don’t know how to handle the situation, then the Home Affordable Refinance can help your cause. This is a new program introduced by the Obama Government to assist millions of homeowners who can’t refinance their property due to loss of equity.

Home Affordable Refinance Program in brief:
It is a program which lets you to refinance your existing mortgage into a fixed rate loan for 30 years or 15 years even though you owe more on your mortgage than your home is worth. While you refinance the mortgage, you can take advantage of the current rates prevailing in the market.

Eligibility for Home Affordable Refinance:

• You must be current on their mortgage payments. Also, your mortgage should have been originated before January 1, 2009.
• The 1st mortgage on your home should not exceed 105% of the present market value of the property.
• Your loan should be backed by Fannie Mae or Freddie Mac. Homeowners with jumbo loans do not qualify for this program.
• You can take advantage of this program only for your primary residence.
• You should have sufficient income to pay off the loan according to the new plan given by the lender.

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Most of the homebuyers who have purchased their dream home during the housing boom of 2004 - 2006 are upside down on their mortgage. So, what does “upside down on mortgage” mean? It is a situation where you owe more money on your home than you could get by selling it. It’s very discouraging to know that you owe more on your home is worth.

But hold on. If you find yourself in such a situation, you have some options which might let you keep your home. Check them out here:

1. Programs available and whom to talk: When you are upside down on your mortgage, it is very important to know what programs are available for you. You should also know whom you should talk to in order to take advantage of those programs. For example Hope for Homeowners is great program to help people who are on the verge of mortgage default and foreclosure. You can contact your lender and check out how they can help you in your situation.

2. Rent your property: Though renting of the property leads to a lot of wear and tear, you can demand rent that equals your monthly mortgage payments. However, this would depend upon your location. In the meanwhile, you can devote some amount of money towards the principle balance which will help you in building equity. However, I agree that this option may not be open for everyone.

3. Consult Your Lender: A lender does not want to take away your home. With lots of foreclosed property in the market, he may have to bear a huge loss if he forecloses the property. If you are unable to pay the mortgage debts, speak to you lender about loan modification. Through this process, the lender will give you an alternative payment plan in order to pay off the loan.

If you do not want to keep the property further, you can speak to the lender about short sale and deed in lieu of foreclosure. Though these steps would tarnish your credit, it would not be as stressful as foreclosure or filing bankruptcy.

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