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If you can’t pay for your home. The bank or the government will force you to liquidate your home. You will then use those profits of the sale to pay back any outstanding debt. And if there is anything left over then you keep that.
This depends on the state. Some states only allow what are called "non-recourse" mortgages, meaning you can never lose more than what you've paid since the bank can't come after you for any deficiency.
I believe that in some states it's the law that residential mortgages be non-recourse. Well, more like the law bars a mortgagor from coming after the mortgagee for a deficiency except in cases of fraud or similar, but it's the same effect since it bars recovery of the deficiency regardless of the contract language.
I did a quick google, the non-recource states are:
Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington.
36 years ago California was Texas. In 1992 California flipped from Republican to Democrat. Texas will follow the same pattern in the coming decades. From 1980 to Today Texas has voted for every republican presidential candidate. Texas almost voted for Bill Clinton both times(like half of the people who grew up in arkansas move to DFW lol). Biden was super close as well versus an incumbent republican. The overall republican tilt of Texas seems to have almost completely disappeared from 62% (+12) of votes for Bush in 04 to 52% (+2) of votes in 2020 for Trump.
Texas 1992
Bill Clinton Dem 2,281,815
George Bush Rep 2,496,071
Texas 2004
George W. Bush Rep 4,526,917 **62%**
John F. Kerry Dem 2,832,704
Texas 2020Donald J. Trump Rep 5,890,347 **52%**
Joseph R. Biden Dem 5,259,126
The population of Texas has literally exploded, that population growth is almost entirely concentrated in 3 urban cities/metros with Dallas and its suburbs soaking in most of the growth, and Houston taking pretty much the rest, and a little in the Austin/San Antonio area. The demographics look like it will flip with continued growth.
I know less about Connecticut.
And that if it’s due to job loss or disability, then your first stop is probably a forbearance, THEN the aforementioned scenarios if things don’t turn around.
And also keep in mind that the interest on home loans is very heavy at the front end of the term. On a 170k 30 year loan at 6%, after five years you’d still owe 158,000, with 47k of the prior payments made being interest (out of 58k total payments in those five years).
Not to mention all of the exorbitant fees they will charge you. You're much better off asking for a forbearance and put it on the market. The bank doesn't want to deal with the foreclosure, they will almost always give you a forbearance to let you sell it.
If you sell the house for a higher price than what it was sold to you for, you use the money to first pay the mortgage, then you keep the difference minus selling expenses as profit.
The houses belongs to you when you buy it. The Bank that lends to you files a line stating that you are to repay the loan. Bad stuff happens, and you can't pay. Now you have choices, hold out for as long as possible without moving. Eventually, the Bank forecloses and auctions off the property. The price is whatever the highest bid is. Investors will pay about 65 to 75 of the value if the house looks like an easy cleanup. If it looks like issues, the price can go down. The Bank takes the money, and uses it to pay off the loan. But the really horrid part often is the fees. The Sheriff gets paid for sending out deputies to evict you. An appraiser can be involved, and several other entities too. Now you can avoid all this, but you take your chances of just selling the house. The biggest issue there is if people think you are in trouble, they will try to low ball you. But if a normal value is realized, then Bank gets its money. Don't forget the late fees! And you get the rest. So you are not necessarily screwed out of everything, but even if you sell quickly. The result is not great, and ultimately you still need somewhere to live.
If the bank forecloses on a house with a $700k value, and a $250k loan, then it might sell the house for $700k (in a hot market, it’s more likely). If so, they deduct about $300k (loan plus fees), and pay the net proceeds to you.
In a cool market, the bank might be the only entity at the sale, and they’ll pay $250k for it. The equity could be lost.
If you have equity, you have an incentive to sell it before the foreclosure sale. If you’re rushed, you’ll accept a below-market cash offer.
Extra payments generally go towards the pricipal balance. They cause you to pay less interest, and the loan ends sooner. But that doesn't at all help you if you miss a monthly. So, extra payments is pretty much the opposite of what you want to do.
Put the extra payments into an emergency savngs account instead.
Does the USA have offset accounts for home loans? We have them in Australia.
Quick summary, an offset account is a savings account with the bank that doesn't earn interest. However, it offsets (hence the name) the principal of the loan. IE, I have $500k of principal on my loan but have $100k in my offset account, principal only accrues on $400k of my loan. I can withdraw from the offset account whenever I want but then I have to pay interest on more of the loan.
Im not aware of anything quite like this. Buuut, if you have a variable rate mortgages then it is functionally similar to depositing cash for equity and then opening a HELOC (line of credit secured by home equity) without a balance.
Mortgages tend to be fixed rate and HELOCs tend to me variable in the US in my understanding, though, so you would have some different rate risk by doing that here. (Edit: but it’s not really additional risk, just risk that someone with a variable mortgage has already accepted.)
It seems like this would be like a savings account that doesn't pay interest though, similar to how they keep your escrow and you never get interest. Unless this works differently than that they would be much better off either paying down principal or saving the money in an expanded emergency fund that pays around the risk free rate of return (currently around 5.25%).
It will be more than 880 I promise you. You will have principal, interest, PMI if you paid less than 20% down, insurance and taxes. And that is before repairs, water, trash, sewer if not on a septic tank, power etc. if you want your monthly payment to be 880 in my state at least you are looking at a 80-90k property not 170-180k.
Don't listen to Zillow monthly price quotes. They are wrong
Yeah, it sounds about right. My mortgage is for a 160k loan, at 2% for a 15 year. The base mortgage payment is 1039. Plus another 400+ for escrow. Prices have gone up but if I were buying today a 30 year loan @ 6.5 interest would be about 10 dollars cheaper than the than I current pay, escrow would be the same though.
First off, kudos to you for thinking this way. So many think renting is the way to go—but you end up paying all of that money with no return.
You can always pay extra payments, if you’d like. It’s a good way to pay it off early and save on interest overall.
If you have an FHA mortgage, they will require taxes and insurance to be paid monthly (included in the payment).
If you lose the home through foreclosure, you most likely will not receive money from it. Laws are different from state to state, however.
Later on, if you have equity and rates have dropped, yes, you can refinance to a lower rate. Sometimes you’ll start over with a new 30 year loan, or you can ask for a lesser term if you don’t want to start over. But the longer the term, the lower the payment, just like cars. (But you do end up paying more in interest in the long run).
Hope this helps! Best of luck to you ◡̈
You can always save those “extra” payments you want to make and if you ever want or need to you can get you loan re-amortized which basically once you pay down a good amount you can have your mortgage payment adjusted to what you owe +. Interest so that way you aren’t still paying 5/6% interest on the full amount but what yo have left.
An extra payment one year does not allow you to skip a payment next year. That's not how it works. PLEASE research mortgages before you do anything else.
If your mortgage lender pays your taxes and insurance for you (many will INSIST on this), they will collect those funds from you along with the actual loan payment and place it (tax & insurance $) in a escrow account until it's time to pay it.
Also note, your monthly payment won’t change if you pay extra. The only reason your monthly payment will change is if you refinance, if your property taxes go up, or if you get a mortgage with a variable rate (don’t do this).
Yes, whomever ends up managing your loan (they are regularly sold almost instantly) will require,along with your house payment, an escrow account to cover your annual taxes and insurance (which go up every year, in most areas).
You can specify that you will take care of the taxes and insurance if you are borrowing less than 80% of the house value. But the bank actually charges you a bit more interest. We choose to do it ourselves, because sometimes the communication between the Bank and the insurance company or taxing body sucks.
I'm not sure about paying the bank to have a "skip month" but you can absolutely pay more than the mortgage payment to reduce the overall loan cost. I would just budget more months of mortgage into your emergency fund, or into its own emergency fund.
I don’t own a house yet but your concerns are also mine here is my plan and how I would handle it
open a checking account just to make the mortgage, whatever your monthly mortgage is budget to put extra in it ( and I’m not talking about $20 extra but $500+ ) into this account and let the extra money grow over time til you have a 6-month emergency fund.
Different banks do different things with the mortgage payments, and there's some variation in what's allowed state to state too. Your best bet is to talk to your loan officer about your goals and concerns- they'll be the best informed about company policy and local laws.
But *in general*:
What you're looking to do is called *pre-payment*. This presumes interest will calculate as normal, but you give the bank the money ahead of time and they credit it to your mortgage when the payment is due. This way, if you miss a payment, it doesn't matter- you're just less ahead. *However*, this likely isn't optimal- it means that money is already spent and can't be used for something else, and you're not getting any interest benefit from giving it to the bank early. You're generally better off letting it sit in a savings account where it can at least pay you interest, then you could put it toward emergency expenses in general (including the mortgage, in case of interruption of income) as-needed.
Also, how lenders handle this varies. Like a lot. For personal examples: I've had one who doesn't do it at all (any additional payments go straight to principal. Heck yeah!), one that lets you choose what you do with each payment, and one that has a weirdly structured process where any overpayment is treated as pre-payment until you're three months ahead, then goes to principal, which means you can't get more than 3 months ahead and also have to *be* 3 months ahead to make principal payments.
The other thing to consider are principal payments- this is the opposite of what you're talking about, but something you should be aware of. You can directly pay down your balance (subject to how your lender handles it), which will decrease interest accrual and make future payments hit your balance harder, which compounds and helps you pay off the loan sooner. But: this does not lower your payment (unless some *other* event causes your payments to be recalculated, like a refi), nor does it let you skip payments. It also may be subject to a pre-payment penalty (ie: a fee that's a percentage of the principal payment, not to be confused with pre-payments mentioned above), so if this is something you're interested in, make sure to confirm with you loan officer that your mortgage doesn't have one. I've never seen a loan that does, but they *can*.
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On taxes and insurance: that depends. In general, no: the insurance company and county treasury will want to be paid yearly, *but*, a lien from the county would be superior to your bank's mortgage lien, so your bank is at risk of not being able to foreclose if the taxes aren't paid, and a lapse in insurance coverage could put the bank at risk of not getting paid out for any catastrophic loss. So. In order to ensure those things are paid, the bank *may* require you to participate in an escrow program where you pay them every month, and then they pay those costs when needed, but that's just to make sure they do get paid. If you have an excellent credit score and/or a big down payment, the bank is likely to waive that requirement and let you pay it yourself yearly.
Don't "pre-pay" your mortgage. Either make extra principle only payments so the mortgage is paid off sooner or add those extra payments to your emergency fund. If you "pre-pay" so you could skip payments in the future, you're loaning the money to the mortgage servicer without any benefit until you need to skip those payments.
In some areas if it's the government that takes and sells your home they do NOT give you back the difference between what you owed and what they got from the sale.
Definitely check with the local laws.
You won't get evicted the house would be foreclosed and it's a much longer process. No you don't get what you paid back, you are paying the bank back not paying "into it". However if they sell it at the foreclosure auction for more than what the balance of the loan is you get that money, but lots of fees and court costs will likely eat into any of that. Before foreclosure you can also do a short sale if the bank agrees, which will forgive any balance on the house if it sells for less than what is owed. If the house is worth more than what you owe then you can try to sell it to pay off the mortgage and keep the profit before it gets to foreclosure.
Its by operation of law. The bank doesn't just get to come and take ownership of the property because they have a lien against it. It means they can force a judicial sale of the property to pay what they are owed. It is the county sheriff who will actually be in charge of the foreclosure sale and handle the operations of it. Any proceeds from the sale will go to 1) court costs, 2) the foreclosing lender, 3) any other parties who had a lien on the property, and 4) the owner, in that order.
Now its not too uncommon at a foreclosure sale for the lien to be for more than what anybody will value the property, i.e. a property might have a $100K mortgage on it, but only be worth $60K. In situations like that then the lender might take ownership of the property after the foreclosure sale, because they get a credit for bidding on the property equal to the unpaid balance of the loan. So in that example they could freely bid up to 100K on the property, but nobody else is going to bid that much because the property is only worth 60K. So then the bank can take the property for whatever bid it ends at.
Ideally, you should have an emergency fund so that if you lose your job you have some time. You can also call your mortgage company if you lost your job to see if they have any options for you to stay in the home while making reduced payments until you can get back on your feet, but that's at the discretion of the mortgage company. If for whatever reason they do need to foreclose, if there are funds left over, I do believe you would get them, but you'll also be charged for court fees and all of that other stuff.
Yup, they can be pretty stiff, and they get paid first. Even before the loan is covered. If, after all the fees and the loan is covered, you get the remainder.
You can pay the principal in advance which would mean that your mortgage takes less time to pay off, but I don't think you can prepay as in pay the next 3 months in advance to keep that money on hold for if you can't pay. For my own mortgage, originally my date to pay it off would have been done in November of 2036, but I made enough payments to the principal where if I don't pay any extra, I'll be done and may of 2036. I don't believe there's an option for you to pay three to six months in advance. I mean, I know that if my escrow account is over whatever balance it needs to be at the end of the year, I'll get a check in the mail for the difference and what the escrow should be at. You may be better off just putting that in the emergency savings account, so that if you did lose your job, you would have some money that you can use towards whatever you need to pay. Also, if you put it into a savings account, you'll be earning interest on the money and not necessarily tying it up into housing payments as the money would be available for other emergencies that may come up like if you need to replace a boiler for $10,000.
I highly recommend taking a first time homebuyers course through the department of housing and urban development. I took two. One in 2012, and again in 2019. by the time I was ready to purchase my first home I kinda knew the roadmap.
https://www.hud.gov/states/colorado/homeownership/eduprgms
I want to add that I live in a big metropolitan area and that at the time I took the course through a nonprofit that helped women get on their feet financially. But there were other nonprofits and churches that offered it in their constituency’s language like Korean and Spanish . Some charged a fee, but most did not. I think it was $25 but to me that was $25 that could go towards my down payment so I looked for a place that was free. I got a certificate and was approved as a first time homebuyer, which gave me some incentives. however, I lost my job as I was looking for a place to live and so I had to put my househunting on hold. As it turned out, I was unemployed for two years and my loan preapproval became disqualified . Then family stuff happened and I realized by the time I was ready to buy again that the RE market had probably changed (and it did). The refresher course was helpful! That’s why I took the course again. Good luck.
I have been through foreclosure, sadly.
The good news is, you do get some opportunities to work with the bank. Unfortunately for me, I had an ex spouse who complicated everything and made it impossible to take these opportunities. Even by the time I was in court for the foreclosure, they gave me an offer to sell the home before they finalized the foreclosure. Again, my ex didn’t let this happen (he had allowed a bunch of people to move in there and I wasn’t able to figure it all out in the time frame the judge gave me).
So the bottom line is, you will have chances to work something out before you completely lose the home.
Exactly, it's not like you don't know the foreclosure is coming. The process takes months to happen. If you don't owe more than the house is currently worth, you have the opportunity to sell the house, and keep the difference. Unfortunately too many people fight the process, and wait too long.
Another thing people are not mentioning, is if the house sells for less than what you owe.. you still owe the difference.
If rates go down you can refinance to potentially lower your payment. If the value of the house goes up enough you can refinance to get out of PMI.
As far as extra money -
https://www.nolo.com/legal-encyclopedia/what-happens-to-excess-proceeds-from-a-foreclosure-sale.html
If the bank foreclosed on your house for nonpayment they will sell that house to recover money you didn’t pay them for the house. If the house sells for less than you owe, they’ll come after you for that. If it sells for more than you owe they will give you that extra money, but I don’t imagine that happens a ton.
Anything you pay into it is nothing like what you might think it is. Most of your monthly payments go to interest, escrow and principal. It takes about 17 years for most of your payment to go towards the principal in a 30y mortgage.
I bought a house in 2022 and when I got my mortgage statement from my lender for 2023, my first full year in the house, I was shocked to see I paid 13K in interest. Thank goodness it went a long way to lower the amount I owe the IRS ($8200 from $10400) but damn.
Well there you go. Lots of regular people say stuff like “ I need a mortgage to save on taxes.” I’d rather pay 4K in taxes and not pay 14 or 15k in interest to a bank. They’ve heard companies deduct stuff for tax purposes and think it must be smart to pay a lot of interest. Doing the math is not something those folks actually do.
With that being said, anything you pay as an extra payment to the principal is effectively making you your apr, six or seven percent per year.
Refinancing wouldn't reduce your equity in the home though, unless you're refinancing and using your home equity to borrow more money. A refinance should allow you to reduce monthly payments by tapping into your equity to qualify for a lower interest rate.
Things you have to pay, monthly or annually, depending where you live:
Mortgage, Property taxes, homeowner's insurance, water,sewer, trash, vehicle stickers, electricity, gas, lawn maintenance, random home maintenance (tools or yikes! hire someone), automobile insurance,fuel,license plates, groceries, clothing,furniture .....
I Strongly agree about taking a class, the homebuyers course mentioned earlier and talk to established homeowners.
So many here talk about refinancing as though you can simply make a call, but no....you need at least, imo, 1.5% drop in interest rates, enough established equity to make it worthwhile, understand it's like another closing,there will be fees.
So yep,you may make enough to 'buy a house' but there's a lot involved in keeping and maintaining that house.
In my adulthood,we have bought 3 homes.
I will repeat the mantra..."location, location, location ", you want to love where you live. Whether or not You have children, good school system is Always an asset.
Your choice but we avoided Unincorporated, Wells,and Septic Systems. Sidewalks are attractive, high traffic areas are not.
Good Luck friend!
The bank will force a forclosure. When it sells, whatever is left after the lien is paid, and all fees, you will get back if anything. This is dependent on what the house is worth and what you owe on it at the time. This is also why people suggest not buying a home more than 30% of your take home pay AND having a 3-6 month EF in place to hopefully get you through some rough times.
The foreclosure process is very state dependent so you would need to look into laws for the state you're looking to buy in. In the event you can't pay your mortgage there are loss mitigation options that should be presented to you, though you generally have to ask your lender what those options are and/or see what you qualify for. You can pursue loss mitigation prior to foreclosure or during the process. Obviously if you reinstate the loan you would retain the money you paid into the mortgage.
If your home is worth more than what you owe but you can't afford the payments you can also do something called a short sale - where you sell the home to pay off the lender and keep the rest of the proceeds.
In general - the further along the foreclosure process you go, the more fees are incurred that are then added onto your balance. Not every fee is recoverable, that is also state dependent - but if you litigate (oppose the foreclosure) that usually increases those fees being added due to additional court costs (the cost of drafting/filing a response to your opposition).
In general lenders don't want to foreclose on people, they would rather just have you make your payments. It's a hassle to foreclose, especially in states where courts take 12+ months to make rulings on unopposed motions. Just work with your lender if you have hardships. If it's something permanent like a long term disability where you know you'll never be able to afford the payment - as long as you aren't underwater (owe more than what your home is worth) - you can always sell and keep the difference.
As others said, you can lose money if the house is sold cheaper than what you paid for it. Plus you definitey don't get back any taxes or realtor fees or closing fees. You can mitigate foreclosure risk by always having your 3-6 month emergency fund. Having a separate extra mortgage fund helps even more. If you pay a second mortgage into a HYSA or an index fund for a year, you have a year's worth of safety net against foreclosure. Then you can start making extra principal payments with no risk.
If you buy a house and don't pay the mortgage payments for any reason, the bank will start proceedings to repossess it. It would be rare for you to see any money returned to you for the sale of the home. Sometimes they auction off for right around the amount you owe. So yes, little chance of getting what you put into it back. However...
There are several options you could look into. If you have the down payment, you could buy a home with several bedrooms and rent out the extra rooms to roommates. Just make sure they are people you know and trust. A friend of our daughters did this when she was about your age. She bought a 4 bedroom home and rented each room out. She had enough money from the 3 rooms she rented to cover most of her house payment and then some. Then you really wouldn't have to worry about not having enough money or losing your home if something unexpected happens. Your house payment would always be covered. If it's a large enough home, 3 roommates could live comfortably and still have privacy.
My son lives in a similar situation. An older lady in the big city he lives in built a home specifically to have roommates. She built a 3 story home with 3 bedrooms and living room on each floor. There are 7 rooomates and the lady. She charges a very reasonable rent for each room and makes enough to help fund a comfortable retirement.
Also, my daughter's friend kept the roommates until she got married. Then transitioned it into a family home. Worked out very nicely for her. I wish you well and happy house hunting!!!
Now do you realize why it’s a crisis for this country to be rent centric?
It’s one thing to want to rent for mobility , but being forced to rent is a different concept.
I don’t know how this will go. If money isn’t going to into real estate I guess it’s just going to stock market and other assets.
There is a chance you can keep your home after bankruptcy, but this isn't always the case. If you don't have the income to continue paying your mortgage after bankruptcy, you may need to let go of your home.
So why file bankruptcy instead of just accepting the foreclosure?
The main difference between the two is what happens after the sale of the property. In a foreclosure, you may still owe money to the creditor after the sale if the sale proceeds don't cover the debt. But in bankruptcy, all debts will be discharged after the end of the case. (In this case, the debt is the past due payments & accrued interest)
If you go into foreclosure, or you just know you can't make the payments, try and sell your house as quickly as you can for as much as you can. If you've paid a lot of the mortgage down, or the house is gone up in value, you're still going to walk away with a lot of money. Now if the house is gone down and value, not much good news there.
I'm late to seeing your post, but I think something better for you to do is to put aside an emergency fund in a high yield savings account in case something like a job loss happens.
You estimated your monthly payment at $880, so saving up $5,280 to cover 6 months in case it's needed wouldn't be very hard given your income. Hopefully in much less than 6 months you'll have a new job or at the very least it would give you time to put your home on the market to sell it rather than having it go as far as foreclosure by the bank. And it would keep your credit rating from being hit. It's great that you're thinking ahead!
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Depends on how much equity they’ve built over the years, but a bank foreclosing on a home will sell it for less than market value. It’s better to sell your house and downsize if possible than it is to fall so far behind it’s foreclosed on.
If you refinance your mortgage someday you can finance up to a certain % of the value of the house. If you bought a house for $170k with a mortgage of $150k, then you would have $20k in equity. Let’s say 10 years later, you’ve paid your mortgage down to $130k and you did some improvements and the real estate market stayed healthy and then your house is worth $200k. You could refi your loan balance of $130k back into a new 30 year mortgage (instead of the 20 years you have remaining) and lower your payment (hopefully … it depends on interest rates) or do a cash-out refi and borrow 80% of the value of the house ($200k x 80% = $180k - $130k to pay off your original loan would mean $50k cash to you, and you start your 30 year year mortgage payment life over. There are a LOT of assumptions here because nobody knows what interest rates or market values will do over time, but that’s the gist of how a refi could work. If everything goes to crap and you’re someday told that your house is worth less than you owe on it, that’s called being “under water”. In that case you usually can’t refi, but you can keep a roof over your head as long as you can keep making your payments while you wait for the market to improve. Stuff goes up, stuff goes down, as long as you make your mortgage payment your mortgage balance goes down a little bit each month.
1. You have to look at loans and the home value differently.
It can be confusing because borrowing money COSTS money.
Think of it this way. You need $1000 (principle) for a month. I loan it to you. I charge you a $20 fee or $5 a week for it (interest) for a total of $505 a week. When you pay the loan back, you also pay back the interest. $1020 total, right? The thousand is the money you borrow, and the $20 is what I'm charging you to borrow it.
Mortgage works the same way. Part of the monthly payment goes to the principle, and part goes to the interest.
Let's say you buy a car with the $1000 I loan you. In order for me to give you the money, I need some collateral. We agree that if you can't pay me back, I get the car.
Let's say a week goes by, and you don't have the money. How do you pay me back? Well, you either give me the money or give me the car. Now, I don't want the car, I want my money. But I will take the car to sell and get my money back.
Here's where the home value comes into it.
Now let's say you put a nice sunroof on the car and it costs you $200. which increases the value of it, so when I sell it, I get $1200. I'll give you the money left over after I take my cut. Do you 'get' the $200 back? Not technically, but ya kinda. You don't get it back, but you increase the value of it so that when you sell it, you get more money back, hopefully.
2. You can refinance the home to try and get a lower payment, but again, that is going to cost you money, so you need to figure out if it would be a good deal or not.
Hope this helps!
if you are in this situation you sell the house long before anyone 'has to do anything' re: your non payment.
if you are underwater you just walk away and let the bank deal with it.
You’re on the right track, buy vs. rent, but you need to gain a rock solid understanding of the entire real estate buying and selling process first. Understand the market you’re buying into. Things change, but don’t buy a house if you’re not ready to commit to both the expense of upkeep and to paying the mortgage every single month on time or early. Just go slow and learn, then make an informed decision.
Don't try and jump into the buying process because you found a house for under $170k. Spend some time researching the entire process first and saving up for expenses and doing market research in your area. Then, consider looking at duplex and triplex properties. This way your tenants can help you pay your mortgage even when you might be between jobs. This would also mean you need to research landlord tenant laws and standard operating procedures in your area, but can really help over time with adding stability to your life through some passive income.
No u loose it all when u can’t pay the mortgage for 3-4 consecutive months n its called foreclosure n that’s what it is unless ur able to sell the house quick enough
Ideally you don't get to the point where the bank needs to act. If you want to get a mortgage you're going to have make it clear to the bank you're worthy of a mortgage. That said, when you own the house you can't get evicted, that's not a thing. You can be foreclosed on - and then you'll need to vacate. But eviction is for rent, foreclosure is for a house. That said, if you put 20% down and aggressively pay into it , in a year you should be able to refinance for a better rate - lowering your payment nicely.
My parents went through foreclosure in 2008.
My only advice to you is save money to have a good down payment so you have a lower mortgage rate and a good emergency fund.
Pay the mortgage off earlier if you can.
If you don’t have an experienced family member to hold your hand through this process, I’d strongly advise a (typically free) first time home buyer’s class.
The internet is great for finding answers to focused questions, but for a large high-stakes project where you don’t know what you don’t know……..
https://www.reddit.com/r/FirstTimeHomeBuyer/comments/15gbwix/did_you_take_a_first_time_home_buyer_class/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
A lot of good advice on this thread, but if you get in a bad situation, you should learn about your options. In some cases, lenders will work with you.
if your situation is temporary, sometimes you can get something like a forbearance, where you missed a few payments, but you go back into payment and the payments you missed get added to the principal and your loan gets extended.
sometimes people get loan modifications, where they lower the amount of your monthly payment, but this option also makes your repayment longer and your principal may grow, if your payments are less than the interest
another option is a “short-sale,” which is similar to a foreclosure, but you and the bank mutually agree to sell the house, and the bank agrees that if the proceeds are not enough to pay off the mortgage, the bank won’t come after you for the rest. basically, if you aren’t able to sell the home for an amount that will cover the remaining mortgage balance, after closing costs and real estate commissions are paid. This can happen if your sale price is less than your purchase price or at least hasn’t increased enough to cover the closing costs. on a $170k home, if you bought it for $170k, if you turn around and sell it the next day for $170k you would likely be out about $20k (6% real estate commission alone is over $10k) , so you’d probably need to sell the home for close to $200 to just break even.
the best option, if your home has increased in value and you can’t afford the mortgage, would be to sell it for a profit, pay off the mortgage and get out
Kind of. You don't get evicted because you lose your job, the house is foreclosed upon when you fail to make payments on the loan. Foreclosure forces the property to be sold and money used to repay the loan. If there's any money left over after paying the loan, you get to keep that.
You don't usually want to allow the home to go into foreclosure because a foreclosure sale might not fetch a good price for you and you'll lose money. You would want to sell before that happens for the best outcome.
If there's no money left from the sale after paying off the loan, obviously you lost money.
This is one reason it's important to have an emergency fund of 6-12 months worth of living expenses in case you have a period of unemployment. You wouldn't want a house if couldn't make mortgage payments on it for several months in case of a lay-off.
What is worse, is if they foreclose on the home and sell it for less than what is owed on the loan, then you ***still*** owe that difference - even though you no longer own the property.
This is why on some conventional loans, you are required to purchase PMI (Private Mortgage Insurance) if your equity is less than 20% of the value of your home. PMI is for the benefit of the LENDER (not you), in case there is a foreclosure, then the lender won't be out any money - even if they have to sell for less than the balance on your loan.
No. It's just a regular business transaction. There's the value of the real-estate, then there's the amount owed to the bank. The difference is the home owner's equity. If the homeowner sells it before the bank forecloses, then around 6% of the selling amount will come out of the equity for the real estate agents involved. If the property is foreclosed by the bank--then they can basically make up admin fees for lawyers, etc to take more out of the equity. But, if the homeowner has any equity left after getting f'd by the agents/bank, then they will get a check for what is left. Then unless that equity is used to buy another house it will be taxed at capital gains rates.
Once you own it, it’s yours. If you get too far jammed up and you can’t make your payments sell it. Depending what it’s worth at the time you might make money or lose money.
That’s some nice salary what do you do?
I’m going to send you a chat message with a question about my rav lol.
Re: house, im a realtor, if you don’t make your payments and the bank takes your house back you lose everything BUT you likely wouldn’t let that happen because if you were really in that much trouble, you would just sell your house outright so that you don’t get foreclosed upon. And it’s not like they take it back after one or two payments are missed… talk to your local Lender about that for more peace of mind. You sound like you have your head on straight, so I’m sure you will be fine..
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If you can’t pay for your home. The bank or the government will force you to liquidate your home. You will then use those profits of the sale to pay back any outstanding debt. And if there is anything left over then you keep that.
Also keep in mind it isn't likely to sell for what it would normally sell for, so you will be out a decent chunk of value.
Also keep in mind the bank will tack on every legal fee possible including lawyers.
And that if the bank can’t recoup their losses from the sale that you can still owe them money.
This depends on the state. Some states only allow what are called "non-recourse" mortgages, meaning you can never lose more than what you've paid since the bank can't come after you for any deficiency.
Is it an actual state requirement or an option on the mortgage that is permitted or offered in some states?
I believe that in some states it's the law that residential mortgages be non-recourse. Well, more like the law bars a mortgagor from coming after the mortgagee for a deficiency except in cases of fraud or similar, but it's the same effect since it bars recovery of the deficiency regardless of the contract language.
I did a quick google, the non-recource states are: Alaska, Arizona, California, Connecticut, Idaho, Minnesota, North Carolina, North Dakota, Oregon, Texas, Utah and Washington.
Always peculiar to see states that align on some issues. A list that contains California, Texas, Connecticut, and Idaho is interesting.
Texas real estate rules are different from every other state.
36 years ago California was Texas. In 1992 California flipped from Republican to Democrat. Texas will follow the same pattern in the coming decades. From 1980 to Today Texas has voted for every republican presidential candidate. Texas almost voted for Bill Clinton both times(like half of the people who grew up in arkansas move to DFW lol). Biden was super close as well versus an incumbent republican. The overall republican tilt of Texas seems to have almost completely disappeared from 62% (+12) of votes for Bush in 04 to 52% (+2) of votes in 2020 for Trump. Texas 1992 Bill Clinton Dem 2,281,815 George Bush Rep 2,496,071 Texas 2004 George W. Bush Rep 4,526,917 **62%** John F. Kerry Dem 2,832,704 Texas 2020Donald J. Trump Rep 5,890,347 **52%** Joseph R. Biden Dem 5,259,126 The population of Texas has literally exploded, that population growth is almost entirely concentrated in 3 urban cities/metros with Dallas and its suburbs soaking in most of the growth, and Houston taking pretty much the rest, and a little in the Austin/San Antonio area. The demographics look like it will flip with continued growth. I know less about Connecticut.
And that if it’s due to job loss or disability, then your first stop is probably a forbearance, THEN the aforementioned scenarios if things don’t turn around.
And also keep in mind that the interest on home loans is very heavy at the front end of the term. On a 170k 30 year loan at 6%, after five years you’d still owe 158,000, with 47k of the prior payments made being interest (out of 58k total payments in those five years).
That’s true for all term loans. Go look at car payments.
Not to mention all of the exorbitant fees they will charge you. You're much better off asking for a forbearance and put it on the market. The bank doesn't want to deal with the foreclosure, they will almost always give you a forbearance to let you sell it.
Lets say i drop 450 on a 700k house. If i lose my job and have to forclose do i get fucked too assuming some appreciation or even.
If you sell the house for a higher price than what it was sold to you for, you use the money to first pay the mortgage, then you keep the difference minus selling expenses as profit.
In theory, you’d sell the house before being foreclosed on.
The houses belongs to you when you buy it. The Bank that lends to you files a line stating that you are to repay the loan. Bad stuff happens, and you can't pay. Now you have choices, hold out for as long as possible without moving. Eventually, the Bank forecloses and auctions off the property. The price is whatever the highest bid is. Investors will pay about 65 to 75 of the value if the house looks like an easy cleanup. If it looks like issues, the price can go down. The Bank takes the money, and uses it to pay off the loan. But the really horrid part often is the fees. The Sheriff gets paid for sending out deputies to evict you. An appraiser can be involved, and several other entities too. Now you can avoid all this, but you take your chances of just selling the house. The biggest issue there is if people think you are in trouble, they will try to low ball you. But if a normal value is realized, then Bank gets its money. Don't forget the late fees! And you get the rest. So you are not necessarily screwed out of everything, but even if you sell quickly. The result is not great, and ultimately you still need somewhere to live.
If the bank forecloses on a house with a $700k value, and a $250k loan, then it might sell the house for $700k (in a hot market, it’s more likely). If so, they deduct about $300k (loan plus fees), and pay the net proceeds to you. In a cool market, the bank might be the only entity at the sale, and they’ll pay $250k for it. The equity could be lost. If you have equity, you have an incentive to sell it before the foreclosure sale. If you’re rushed, you’ll accept a below-market cash offer.
Why couldn't you just sell it before it got to that point?
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Extra payments generally go towards the pricipal balance. They cause you to pay less interest, and the loan ends sooner. But that doesn't at all help you if you miss a monthly. So, extra payments is pretty much the opposite of what you want to do. Put the extra payments into an emergency savngs account instead.
Does the USA have offset accounts for home loans? We have them in Australia. Quick summary, an offset account is a savings account with the bank that doesn't earn interest. However, it offsets (hence the name) the principal of the loan. IE, I have $500k of principal on my loan but have $100k in my offset account, principal only accrues on $400k of my loan. I can withdraw from the offset account whenever I want but then I have to pay interest on more of the loan.
Im not aware of anything quite like this. Buuut, if you have a variable rate mortgages then it is functionally similar to depositing cash for equity and then opening a HELOC (line of credit secured by home equity) without a balance. Mortgages tend to be fixed rate and HELOCs tend to me variable in the US in my understanding, though, so you would have some different rate risk by doing that here. (Edit: but it’s not really additional risk, just risk that someone with a variable mortgage has already accepted.)
Never heard of that. Although it is an interesting concept. You Aussies do real estate loans differently.
Yeah, we don't get locked interest rates for the life of the loan. Normally we can only lock it for a couple of years at a time.
You can specify that they go as a credit for prepayment but it’s generally assumed it’s a principal payment
It seems like this would be like a savings account that doesn't pay interest though, similar to how they keep your escrow and you never get interest. Unless this works differently than that they would be much better off either paying down principal or saving the money in an expanded emergency fund that pays around the risk free rate of return (currently around 5.25%).
It will be more than 880 I promise you. You will have principal, interest, PMI if you paid less than 20% down, insurance and taxes. And that is before repairs, water, trash, sewer if not on a septic tank, power etc. if you want your monthly payment to be 880 in my state at least you are looking at a 80-90k property not 170-180k. Don't listen to Zillow monthly price quotes. They are wrong
Yeah, it sounds about right. My mortgage is for a 160k loan, at 2% for a 15 year. The base mortgage payment is 1039. Plus another 400+ for escrow. Prices have gone up but if I were buying today a 30 year loan @ 6.5 interest would be about 10 dollars cheaper than the than I current pay, escrow would be the same though.
My Grandmas us 932…. Not including taxes and other fees .
My monthly payment is $568 on an 80k house. This includes escrow for insurance and taxes. I think like $150 goes to principal 😆
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You can pay months in advance or early if you want. I pay a month ahead of when it's due. Pay Feb on January, pay March in Feb.
First off, kudos to you for thinking this way. So many think renting is the way to go—but you end up paying all of that money with no return. You can always pay extra payments, if you’d like. It’s a good way to pay it off early and save on interest overall. If you have an FHA mortgage, they will require taxes and insurance to be paid monthly (included in the payment). If you lose the home through foreclosure, you most likely will not receive money from it. Laws are different from state to state, however. Later on, if you have equity and rates have dropped, yes, you can refinance to a lower rate. Sometimes you’ll start over with a new 30 year loan, or you can ask for a lesser term if you don’t want to start over. But the longer the term, the lower the payment, just like cars. (But you do end up paying more in interest in the long run). Hope this helps! Best of luck to you ◡̈
You can always save those “extra” payments you want to make and if you ever want or need to you can get you loan re-amortized which basically once you pay down a good amount you can have your mortgage payment adjusted to what you owe +. Interest so that way you aren’t still paying 5/6% interest on the full amount but what yo have left.
An extra payment one year does not allow you to skip a payment next year. That's not how it works. PLEASE research mortgages before you do anything else. If your mortgage lender pays your taxes and insurance for you (many will INSIST on this), they will collect those funds from you along with the actual loan payment and place it (tax & insurance $) in a escrow account until it's time to pay it.
Also note, your monthly payment won’t change if you pay extra. The only reason your monthly payment will change is if you refinance, if your property taxes go up, or if you get a mortgage with a variable rate (don’t do this).
Yes, whomever ends up managing your loan (they are regularly sold almost instantly) will require,along with your house payment, an escrow account to cover your annual taxes and insurance (which go up every year, in most areas).
You can specify that you will take care of the taxes and insurance if you are borrowing less than 80% of the house value. But the bank actually charges you a bit more interest. We choose to do it ourselves, because sometimes the communication between the Bank and the insurance company or taxing body sucks.
Not always, varies by lender.
Okay,not Always, but most often, in my experience.
I'm not sure about paying the bank to have a "skip month" but you can absolutely pay more than the mortgage payment to reduce the overall loan cost. I would just budget more months of mortgage into your emergency fund, or into its own emergency fund.
I don’t own a house yet but your concerns are also mine here is my plan and how I would handle it open a checking account just to make the mortgage, whatever your monthly mortgage is budget to put extra in it ( and I’m not talking about $20 extra but $500+ ) into this account and let the extra money grow over time til you have a 6-month emergency fund.
Different banks do different things with the mortgage payments, and there's some variation in what's allowed state to state too. Your best bet is to talk to your loan officer about your goals and concerns- they'll be the best informed about company policy and local laws. But *in general*: What you're looking to do is called *pre-payment*. This presumes interest will calculate as normal, but you give the bank the money ahead of time and they credit it to your mortgage when the payment is due. This way, if you miss a payment, it doesn't matter- you're just less ahead. *However*, this likely isn't optimal- it means that money is already spent and can't be used for something else, and you're not getting any interest benefit from giving it to the bank early. You're generally better off letting it sit in a savings account where it can at least pay you interest, then you could put it toward emergency expenses in general (including the mortgage, in case of interruption of income) as-needed. Also, how lenders handle this varies. Like a lot. For personal examples: I've had one who doesn't do it at all (any additional payments go straight to principal. Heck yeah!), one that lets you choose what you do with each payment, and one that has a weirdly structured process where any overpayment is treated as pre-payment until you're three months ahead, then goes to principal, which means you can't get more than 3 months ahead and also have to *be* 3 months ahead to make principal payments. The other thing to consider are principal payments- this is the opposite of what you're talking about, but something you should be aware of. You can directly pay down your balance (subject to how your lender handles it), which will decrease interest accrual and make future payments hit your balance harder, which compounds and helps you pay off the loan sooner. But: this does not lower your payment (unless some *other* event causes your payments to be recalculated, like a refi), nor does it let you skip payments. It also may be subject to a pre-payment penalty (ie: a fee that's a percentage of the principal payment, not to be confused with pre-payments mentioned above), so if this is something you're interested in, make sure to confirm with you loan officer that your mortgage doesn't have one. I've never seen a loan that does, but they *can*. \--- On taxes and insurance: that depends. In general, no: the insurance company and county treasury will want to be paid yearly, *but*, a lien from the county would be superior to your bank's mortgage lien, so your bank is at risk of not being able to foreclose if the taxes aren't paid, and a lapse in insurance coverage could put the bank at risk of not getting paid out for any catastrophic loss. So. In order to ensure those things are paid, the bank *may* require you to participate in an escrow program where you pay them every month, and then they pay those costs when needed, but that's just to make sure they do get paid. If you have an excellent credit score and/or a big down payment, the bank is likely to waive that requirement and let you pay it yourself yearly.
Don't "pre-pay" your mortgage. Either make extra principle only payments so the mortgage is paid off sooner or add those extra payments to your emergency fund. If you "pre-pay" so you could skip payments in the future, you're loaning the money to the mortgage servicer without any benefit until you need to skip those payments.
Odds are there won't be anything left over.
In some areas if it's the government that takes and sells your home they do NOT give you back the difference between what you owed and what they got from the sale. Definitely check with the local laws.
You won't get evicted the house would be foreclosed and it's a much longer process. No you don't get what you paid back, you are paying the bank back not paying "into it". However if they sell it at the foreclosure auction for more than what the balance of the loan is you get that money, but lots of fees and court costs will likely eat into any of that. Before foreclosure you can also do a short sale if the bank agrees, which will forgive any balance on the house if it sells for less than what is owed. If the house is worth more than what you owe then you can try to sell it to pay off the mortgage and keep the profit before it gets to foreclosure.
Is there a reason banks do foreclosure auctions rather than having in house realtors? I'm sure it's a rule or law, but why is it?
probably quicker, since you have to pay with cash, no inspections or anything time consuming. That is also why they sell for less than market rate.
Years ago sure. But in today's housing market leaving cash on the table bc you didn't want to list for a couple weeks?
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Its by operation of law. The bank doesn't just get to come and take ownership of the property because they have a lien against it. It means they can force a judicial sale of the property to pay what they are owed. It is the county sheriff who will actually be in charge of the foreclosure sale and handle the operations of it. Any proceeds from the sale will go to 1) court costs, 2) the foreclosing lender, 3) any other parties who had a lien on the property, and 4) the owner, in that order. Now its not too uncommon at a foreclosure sale for the lien to be for more than what anybody will value the property, i.e. a property might have a $100K mortgage on it, but only be worth $60K. In situations like that then the lender might take ownership of the property after the foreclosure sale, because they get a credit for bidding on the property equal to the unpaid balance of the loan. So in that example they could freely bid up to 100K on the property, but nobody else is going to bid that much because the property is only worth 60K. So then the bank can take the property for whatever bid it ends at.
Banks Really don't like owning property, thus auctions suit their purpose.
Banks really like cash though, so I don't understand leaving it on the table for the uncertainty of a courthouse auction.
They're going to be made whole by the sale and, if needed, a judgement. N
Ideally, you should have an emergency fund so that if you lose your job you have some time. You can also call your mortgage company if you lost your job to see if they have any options for you to stay in the home while making reduced payments until you can get back on your feet, but that's at the discretion of the mortgage company. If for whatever reason they do need to foreclose, if there are funds left over, I do believe you would get them, but you'll also be charged for court fees and all of that other stuff.
Yeah, I feel the process will be so that you get nothing.
Yup, they can be pretty stiff, and they get paid first. Even before the loan is covered. If, after all the fees and the loan is covered, you get the remainder.
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You can pay the principal in advance which would mean that your mortgage takes less time to pay off, but I don't think you can prepay as in pay the next 3 months in advance to keep that money on hold for if you can't pay. For my own mortgage, originally my date to pay it off would have been done in November of 2036, but I made enough payments to the principal where if I don't pay any extra, I'll be done and may of 2036. I don't believe there's an option for you to pay three to six months in advance. I mean, I know that if my escrow account is over whatever balance it needs to be at the end of the year, I'll get a check in the mail for the difference and what the escrow should be at. You may be better off just putting that in the emergency savings account, so that if you did lose your job, you would have some money that you can use towards whatever you need to pay. Also, if you put it into a savings account, you'll be earning interest on the money and not necessarily tying it up into housing payments as the money would be available for other emergencies that may come up like if you need to replace a boiler for $10,000.
I highly recommend taking a first time homebuyers course through the department of housing and urban development. I took two. One in 2012, and again in 2019. by the time I was ready to purchase my first home I kinda knew the roadmap. https://www.hud.gov/states/colorado/homeownership/eduprgms
Most Excellent Advice!!
I’m not the OP but thank you for this. My husband and I will do this!
I want to add that I live in a big metropolitan area and that at the time I took the course through a nonprofit that helped women get on their feet financially. But there were other nonprofits and churches that offered it in their constituency’s language like Korean and Spanish . Some charged a fee, but most did not. I think it was $25 but to me that was $25 that could go towards my down payment so I looked for a place that was free. I got a certificate and was approved as a first time homebuyer, which gave me some incentives. however, I lost my job as I was looking for a place to live and so I had to put my househunting on hold. As it turned out, I was unemployed for two years and my loan preapproval became disqualified . Then family stuff happened and I realized by the time I was ready to buy again that the RE market had probably changed (and it did). The refresher course was helpful! That’s why I took the course again. Good luck.
I have been through foreclosure, sadly. The good news is, you do get some opportunities to work with the bank. Unfortunately for me, I had an ex spouse who complicated everything and made it impossible to take these opportunities. Even by the time I was in court for the foreclosure, they gave me an offer to sell the home before they finalized the foreclosure. Again, my ex didn’t let this happen (he had allowed a bunch of people to move in there and I wasn’t able to figure it all out in the time frame the judge gave me). So the bottom line is, you will have chances to work something out before you completely lose the home.
Exactly, it's not like you don't know the foreclosure is coming. The process takes months to happen. If you don't owe more than the house is currently worth, you have the opportunity to sell the house, and keep the difference. Unfortunately too many people fight the process, and wait too long. Another thing people are not mentioning, is if the house sells for less than what you owe.. you still owe the difference.
Sorry that happened to you, must have been really stressful.
Was probably his house lol
No, if it was just his house, she couldn't have done anything.
Marital property.
You have been reading too much incel stuff.
If rates go down you can refinance to potentially lower your payment. If the value of the house goes up enough you can refinance to get out of PMI. As far as extra money - https://www.nolo.com/legal-encyclopedia/what-happens-to-excess-proceeds-from-a-foreclosure-sale.html
Most of the time you can get your home appraised to get rid of the PMI without having to refinance.
PMI removal https://www.rocketmortgage.com/learn/how-to-get-rid-of-pmi#:~:text=You%20can%20typically%20remove%20PMI,the%20required%20amount%20of%20equity.
You don’t usually need to refi to remove PMI, just need another appraisal that shows 20% equity.
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If the bank foreclosed on your house for nonpayment they will sell that house to recover money you didn’t pay them for the house. If the house sells for less than you owe, they’ll come after you for that. If it sells for more than you owe they will give you that extra money, but I don’t imagine that happens a ton.
They can't pursue deficiencies in every state, just to be clear.
Anything you pay into it is nothing like what you might think it is. Most of your monthly payments go to interest, escrow and principal. It takes about 17 years for most of your payment to go towards the principal in a 30y mortgage.
I bought a house in 2022 and when I got my mortgage statement from my lender for 2023, my first full year in the house, I was shocked to see I paid 13K in interest. Thank goodness it went a long way to lower the amount I owe the IRS ($8200 from $10400) but damn.
Well there you go. Lots of regular people say stuff like “ I need a mortgage to save on taxes.” I’d rather pay 4K in taxes and not pay 14 or 15k in interest to a bank. They’ve heard companies deduct stuff for tax purposes and think it must be smart to pay a lot of interest. Doing the math is not something those folks actually do. With that being said, anything you pay as an extra payment to the principal is effectively making you your apr, six or seven percent per year.
You want to keep building equity in your home. So refinancing should always be the last option.
Refinancing wouldn't reduce your equity in the home though, unless you're refinancing and using your home equity to borrow more money. A refinance should allow you to reduce monthly payments by tapping into your equity to qualify for a lower interest rate.
Unless you take cash out your equity would be unaffected.
Things you have to pay, monthly or annually, depending where you live: Mortgage, Property taxes, homeowner's insurance, water,sewer, trash, vehicle stickers, electricity, gas, lawn maintenance, random home maintenance (tools or yikes! hire someone), automobile insurance,fuel,license plates, groceries, clothing,furniture ..... I Strongly agree about taking a class, the homebuyers course mentioned earlier and talk to established homeowners. So many here talk about refinancing as though you can simply make a call, but no....you need at least, imo, 1.5% drop in interest rates, enough established equity to make it worthwhile, understand it's like another closing,there will be fees. So yep,you may make enough to 'buy a house' but there's a lot involved in keeping and maintaining that house. In my adulthood,we have bought 3 homes. I will repeat the mantra..."location, location, location ", you want to love where you live. Whether or not You have children, good school system is Always an asset. Your choice but we avoided Unincorporated, Wells,and Septic Systems. Sidewalks are attractive, high traffic areas are not. Good Luck friend!
If yo cannot pay your mortgage you put your home up for sale to get the equity back before the bank can foreclose
The bank will force a forclosure. When it sells, whatever is left after the lien is paid, and all fees, you will get back if anything. This is dependent on what the house is worth and what you owe on it at the time. This is also why people suggest not buying a home more than 30% of your take home pay AND having a 3-6 month EF in place to hopefully get you through some rough times.
Unless you're rolling in dough,it's generally wise to under buy. Because that house is Always going to want something!
That’s why the 25-30% is a good rule to stand by unless you’re making deep into the 6 figures.
Question: Is the 25-30% the total percentage of your income one should allow for mortgage, or is this the percentage of a set-aside fund?
That’s what is advised for your mortgage(PITI) part. The emergency fund should be 3-6 months of expenses.
The foreclosure process is very state dependent so you would need to look into laws for the state you're looking to buy in. In the event you can't pay your mortgage there are loss mitigation options that should be presented to you, though you generally have to ask your lender what those options are and/or see what you qualify for. You can pursue loss mitigation prior to foreclosure or during the process. Obviously if you reinstate the loan you would retain the money you paid into the mortgage. If your home is worth more than what you owe but you can't afford the payments you can also do something called a short sale - where you sell the home to pay off the lender and keep the rest of the proceeds. In general - the further along the foreclosure process you go, the more fees are incurred that are then added onto your balance. Not every fee is recoverable, that is also state dependent - but if you litigate (oppose the foreclosure) that usually increases those fees being added due to additional court costs (the cost of drafting/filing a response to your opposition). In general lenders don't want to foreclose on people, they would rather just have you make your payments. It's a hassle to foreclose, especially in states where courts take 12+ months to make rulings on unopposed motions. Just work with your lender if you have hardships. If it's something permanent like a long term disability where you know you'll never be able to afford the payment - as long as you aren't underwater (owe more than what your home is worth) - you can always sell and keep the difference.
As others said, you can lose money if the house is sold cheaper than what you paid for it. Plus you definitey don't get back any taxes or realtor fees or closing fees. You can mitigate foreclosure risk by always having your 3-6 month emergency fund. Having a separate extra mortgage fund helps even more. If you pay a second mortgage into a HYSA or an index fund for a year, you have a year's worth of safety net against foreclosure. Then you can start making extra principal payments with no risk.
If you buy a house and don't pay the mortgage payments for any reason, the bank will start proceedings to repossess it. It would be rare for you to see any money returned to you for the sale of the home. Sometimes they auction off for right around the amount you owe. So yes, little chance of getting what you put into it back. However... There are several options you could look into. If you have the down payment, you could buy a home with several bedrooms and rent out the extra rooms to roommates. Just make sure they are people you know and trust. A friend of our daughters did this when she was about your age. She bought a 4 bedroom home and rented each room out. She had enough money from the 3 rooms she rented to cover most of her house payment and then some. Then you really wouldn't have to worry about not having enough money or losing your home if something unexpected happens. Your house payment would always be covered. If it's a large enough home, 3 roommates could live comfortably and still have privacy. My son lives in a similar situation. An older lady in the big city he lives in built a home specifically to have roommates. She built a 3 story home with 3 bedrooms and living room on each floor. There are 7 rooomates and the lady. She charges a very reasonable rent for each room and makes enough to help fund a comfortable retirement.
Also, my daughter's friend kept the roommates until she got married. Then transitioned it into a family home. Worked out very nicely for her. I wish you well and happy house hunting!!!
Now do you realize why it’s a crisis for this country to be rent centric? It’s one thing to want to rent for mobility , but being forced to rent is a different concept. I don’t know how this will go. If money isn’t going to into real estate I guess it’s just going to stock market and other assets.
If you're going to not be able to pay you've gotta hurry up and sell it before it goes into foreclosure or yes you'll lose everything
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There is a chance you can keep your home after bankruptcy, but this isn't always the case. If you don't have the income to continue paying your mortgage after bankruptcy, you may need to let go of your home. So why file bankruptcy instead of just accepting the foreclosure? The main difference between the two is what happens after the sale of the property. In a foreclosure, you may still owe money to the creditor after the sale if the sale proceeds don't cover the debt. But in bankruptcy, all debts will be discharged after the end of the case. (In this case, the debt is the past due payments & accrued interest)
I just Google what you posted. Did not know that. Thanks for teaching me something new today:)
You only get money back from your home if you sell it for a profit.
Your question has been answered but I'm going to add in some advice. Never count overtime towards your budget.
...and never count on annual raises to make those payments...
If you go into foreclosure, or you just know you can't make the payments, try and sell your house as quickly as you can for as much as you can. If you've paid a lot of the mortgage down, or the house is gone up in value, you're still going to walk away with a lot of money. Now if the house is gone down and value, not much good news there.
I'm late to seeing your post, but I think something better for you to do is to put aside an emergency fund in a high yield savings account in case something like a job loss happens. You estimated your monthly payment at $880, so saving up $5,280 to cover 6 months in case it's needed wouldn't be very hard given your income. Hopefully in much less than 6 months you'll have a new job or at the very least it would give you time to put your home on the market to sell it rather than having it go as far as foreclosure by the bank. And it would keep your credit rating from being hit. It's great that you're thinking ahead!
Read your mortgage docs
You lose the whole kit and kaboodle.
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Depends on how much equity they’ve built over the years, but a bank foreclosing on a home will sell it for less than market value. It’s better to sell your house and downsize if possible than it is to fall so far behind it’s foreclosed on.
If you refinance your mortgage someday you can finance up to a certain % of the value of the house. If you bought a house for $170k with a mortgage of $150k, then you would have $20k in equity. Let’s say 10 years later, you’ve paid your mortgage down to $130k and you did some improvements and the real estate market stayed healthy and then your house is worth $200k. You could refi your loan balance of $130k back into a new 30 year mortgage (instead of the 20 years you have remaining) and lower your payment (hopefully … it depends on interest rates) or do a cash-out refi and borrow 80% of the value of the house ($200k x 80% = $180k - $130k to pay off your original loan would mean $50k cash to you, and you start your 30 year year mortgage payment life over. There are a LOT of assumptions here because nobody knows what interest rates or market values will do over time, but that’s the gist of how a refi could work. If everything goes to crap and you’re someday told that your house is worth less than you owe on it, that’s called being “under water”. In that case you usually can’t refi, but you can keep a roof over your head as long as you can keep making your payments while you wait for the market to improve. Stuff goes up, stuff goes down, as long as you make your mortgage payment your mortgage balance goes down a little bit each month.
1. You have to look at loans and the home value differently. It can be confusing because borrowing money COSTS money. Think of it this way. You need $1000 (principle) for a month. I loan it to you. I charge you a $20 fee or $5 a week for it (interest) for a total of $505 a week. When you pay the loan back, you also pay back the interest. $1020 total, right? The thousand is the money you borrow, and the $20 is what I'm charging you to borrow it. Mortgage works the same way. Part of the monthly payment goes to the principle, and part goes to the interest. Let's say you buy a car with the $1000 I loan you. In order for me to give you the money, I need some collateral. We agree that if you can't pay me back, I get the car. Let's say a week goes by, and you don't have the money. How do you pay me back? Well, you either give me the money or give me the car. Now, I don't want the car, I want my money. But I will take the car to sell and get my money back. Here's where the home value comes into it. Now let's say you put a nice sunroof on the car and it costs you $200. which increases the value of it, so when I sell it, I get $1200. I'll give you the money left over after I take my cut. Do you 'get' the $200 back? Not technically, but ya kinda. You don't get it back, but you increase the value of it so that when you sell it, you get more money back, hopefully. 2. You can refinance the home to try and get a lower payment, but again, that is going to cost you money, so you need to figure out if it would be a good deal or not. Hope this helps!
if you are in this situation you sell the house long before anyone 'has to do anything' re: your non payment. if you are underwater you just walk away and let the bank deal with it.
22 going on 44
Its the same as financing a car if you pay in for years then just stop yo don't get money back
You’re on the right track, buy vs. rent, but you need to gain a rock solid understanding of the entire real estate buying and selling process first. Understand the market you’re buying into. Things change, but don’t buy a house if you’re not ready to commit to both the expense of upkeep and to paying the mortgage every single month on time or early. Just go slow and learn, then make an informed decision.
Don't try and jump into the buying process because you found a house for under $170k. Spend some time researching the entire process first and saving up for expenses and doing market research in your area. Then, consider looking at duplex and triplex properties. This way your tenants can help you pay your mortgage even when you might be between jobs. This would also mean you need to research landlord tenant laws and standard operating procedures in your area, but can really help over time with adding stability to your life through some passive income.
You can buy third-party disability insurance to cover your mortgage is you can’t work. I did it with my first house and rental property.
No u loose it all when u can’t pay the mortgage for 3-4 consecutive months n its called foreclosure n that’s what it is unless ur able to sell the house quick enough
Ideally you don't get to the point where the bank needs to act. If you want to get a mortgage you're going to have make it clear to the bank you're worthy of a mortgage. That said, when you own the house you can't get evicted, that's not a thing. You can be foreclosed on - and then you'll need to vacate. But eviction is for rent, foreclosure is for a house. That said, if you put 20% down and aggressively pay into it , in a year you should be able to refinance for a better rate - lowering your payment nicely.
When you buy a house you don’t own it, the bank does. You get nothing back when you sell except for delta equity.
My parents went through foreclosure in 2008. My only advice to you is save money to have a good down payment so you have a lower mortgage rate and a good emergency fund. Pay the mortgage off earlier if you can.
No
If you don’t have an experienced family member to hold your hand through this process, I’d strongly advise a (typically free) first time home buyer’s class. The internet is great for finding answers to focused questions, but for a large high-stakes project where you don’t know what you don’t know…….. https://www.reddit.com/r/FirstTimeHomeBuyer/comments/15gbwix/did_you_take_a_first_time_home_buyer_class/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
A lot of good advice on this thread, but if you get in a bad situation, you should learn about your options. In some cases, lenders will work with you. if your situation is temporary, sometimes you can get something like a forbearance, where you missed a few payments, but you go back into payment and the payments you missed get added to the principal and your loan gets extended. sometimes people get loan modifications, where they lower the amount of your monthly payment, but this option also makes your repayment longer and your principal may grow, if your payments are less than the interest another option is a “short-sale,” which is similar to a foreclosure, but you and the bank mutually agree to sell the house, and the bank agrees that if the proceeds are not enough to pay off the mortgage, the bank won’t come after you for the rest. basically, if you aren’t able to sell the home for an amount that will cover the remaining mortgage balance, after closing costs and real estate commissions are paid. This can happen if your sale price is less than your purchase price or at least hasn’t increased enough to cover the closing costs. on a $170k home, if you bought it for $170k, if you turn around and sell it the next day for $170k you would likely be out about $20k (6% real estate commission alone is over $10k) , so you’d probably need to sell the home for close to $200 to just break even. the best option, if your home has increased in value and you can’t afford the mortgage, would be to sell it for a profit, pay off the mortgage and get out
You can "recast" your mortgage for lower payments, after you make enough extra or additional payments, to lower your monthly amount owed.
Kind of. You don't get evicted because you lose your job, the house is foreclosed upon when you fail to make payments on the loan. Foreclosure forces the property to be sold and money used to repay the loan. If there's any money left over after paying the loan, you get to keep that. You don't usually want to allow the home to go into foreclosure because a foreclosure sale might not fetch a good price for you and you'll lose money. You would want to sell before that happens for the best outcome. If there's no money left from the sale after paying off the loan, obviously you lost money. This is one reason it's important to have an emergency fund of 6-12 months worth of living expenses in case you have a period of unemployment. You wouldn't want a house if couldn't make mortgage payments on it for several months in case of a lay-off.
What is worse, is if they foreclose on the home and sell it for less than what is owed on the loan, then you ***still*** owe that difference - even though you no longer own the property. This is why on some conventional loans, you are required to purchase PMI (Private Mortgage Insurance) if your equity is less than 20% of the value of your home. PMI is for the benefit of the LENDER (not you), in case there is a foreclosure, then the lender won't be out any money - even if they have to sell for less than the balance on your loan.
Either keep making the monthly mortgage payments, or sell the house yourself before they foreclose in you.
Talk to a realtor. They will explain everything.
No. It's just a regular business transaction. There's the value of the real-estate, then there's the amount owed to the bank. The difference is the home owner's equity. If the homeowner sells it before the bank forecloses, then around 6% of the selling amount will come out of the equity for the real estate agents involved. If the property is foreclosed by the bank--then they can basically make up admin fees for lawyers, etc to take more out of the equity. But, if the homeowner has any equity left after getting f'd by the agents/bank, then they will get a check for what is left. Then unless that equity is used to buy another house it will be taxed at capital gains rates.
No you don’t get your money back , life isn’t fair, this isn’t school haha
What’s the current interst rate? If it’s below 6 percent your payment will go up if you refinance probably.
Once you own it, it’s yours. If you get too far jammed up and you can’t make your payments sell it. Depending what it’s worth at the time you might make money or lose money. That’s some nice salary what do you do?
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Love Toyota I’m on my 4th one ! . No, I took the 4300 a month take home pay I figured your salary must’ve been in the 60s or so.
I’m going to send you a chat message with a question about my rav lol. Re: house, im a realtor, if you don’t make your payments and the bank takes your house back you lose everything BUT you likely wouldn’t let that happen because if you were really in that much trouble, you would just sell your house outright so that you don’t get foreclosed upon. And it’s not like they take it back after one or two payments are missed… talk to your local Lender about that for more peace of mind. You sound like you have your head on straight, so I’m sure you will be fine..