|Making Sense of the Subprime Meltdown|
If you have been awake at all during the past month, you have
heard about the meltdown of the subprime mortgage industry.
Homeowners defaulting on loans, lenders closing their doors and
the press sensationalizing the entire affair – it’s the makings
of a soap opera. The sad part is that it’s not a TV show, and
real families have been hurt.
Three parties are
involved in a subprime, or nonconventional, loan:
When these loans go bad, it usually means that
the loan was a bad idea in the first place. Either a mortgage broker
was anxious to get the borrower’s business, a lender was willing to
take a big risk to make big money in the short run or a borrower did
not understand what he was getting into.
- A borrower who does not qualify for a mainstream loan,
most often because he or she has credit issues
- A lender willing to fund a loan to the at-risk borrower
- A mortgage broker who brings the borrower and lender
subprime loan is a good idea - at least in the short run. It can
help you get your finances back on track by consolidating your
debt, lowering your monthly mortgage payment and/or
getting you into a house without a down payment. But these
loans are not for everyone, and you need to know the facts before
ever considering one.
Here are some things to keep in mind
when buying or refinancing:
As a borrower, remember this: follow the tips above
to avoid getting into something that could get you into trouble.
- If it’s not prime, it’s subprime.
Subprime loans are
rarely called subprime because the word has such negative
connotations. You may hear them referred to as nonconventional
loans or something else. When talking to your mortgage broker, ask
if you qualify for a conventional loan first. If you don’t, you’ll
end up considering a subprime, or nonconventional program.
- Know your risks.
Discuss all the risks associated
with a subprime loan before you commit to one. The most popular
version is a 2/28 ARM, where your rate is low for the first two
years but can jump drastically after that time period. These loans
are great for borrowers who need to get their credit in line or
who may anticipate a significant income jump within the near
- Remember all of your other expenses.
is just one of the many things that falls under home expenses. One
reason many borrowers have gotten into trouble is that they have
underestimated the cost of electricity, fuel and other utilities
as well as the cost of maintaining general upkeep on a home.
- Check your credit.
If you know you will be in the
market for a new mortgage by either buying or refinancing a home,
do what it takes to get your credit in shape. Get a copy of your
credit report well in advance of starting the process and then
correct any errors, address any problems and do what it takes to
raise your score. You may not even need a subprime loan in the
- Be realistic about your earnings
Low-income or poor-credit borrowers are not the
only ones who have gotten into trouble with subprime loans. Many
individuals have simply bought homes with mortgages they thought
they could “grow into” as their income increased. While it’s
always wise to consider your long-term earnings potential when
buying or refinancing, understand that layoffs, illness and other
surprises are part of life.
- Be skeptical.
If it sounds too good to be true, it
is! Like almost every industry around, the mortgage industry has
its share of creeps who will prey on the most vulnerable in an
effort to make a buck. Take the time to build a relationship with
a mortgage broker, realtor and attorney who you can trust to look
out for you and steer you away from programs that carry risky
|Debbie on Fox25 News|
David Wade and I are getting to be buddies now, as he invited me
to speak again on the Fox25 news about the Massachusetts market.
Here's a look at our most recent chat!
this link to watch!
|March's Home Value Improver|
The Grandeur of Your Garage
Is your garage a
nightmare mess of gardening tools, sporting equipment, shovels and
sleds, bikes and balls? Can you even fit your car inside? If you’re
ready to turn your garage into a more manageable – maybe even an
attractive – space, check out these suggestions.
- Think about how you would like to use your garage. Storage?
Laundry room? Home gym or office? Maybe just to house your car?
You have a lot of options.
- Start by getting everything off the floor and thinking “up.”
Use the walls and rafters for storage to free up floor
- Take advantage of inexpensive shelving, pegboards, cabinets
and overhead hooks to store your goods.
- Once the floor is clear, give it new life with a robust
cleaning, stain removal and a coat of epoxy paint.
- Maximize lighting and install new electrical outlets or
new windows if you want a brighter space.
- If you will be using your space year round, finish and
insulate the walls for maximum comfort.
- Remember to get all necessary permits for work you have
done on your garage.
When the real estate industry is in the news the way it's been in
recent weeks, I'm always flooded with questions from clients - and I
love it. Best regards,
It's an honor to be considered a resource for
clients and colleagues who have questions or concerns about how
industry developments will affect them personally. As the subprime
mortgage industry experiences tremendous turmoil, questions have
involved the risks and rewards of these subprime mortgage
And there are both risks and rewards - no mortgage
program is bad on its own. But they can have disastrous results when
used in the wrong situation.
My company tagline is "Finding
Loans. Focused on You." for a reason. It reminds my clients that the
program doesn't matter as much as they do, that their unique
circumstances should drive their mortgage choice, not the lates and
greatest program advertised.
I'm always here and happy to
answer your questions about mortgages. Consider me your mortgage
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