How to Be a Real Estate Statistic in 2008 - The Good Kind

This past year of 2007 was a year of record-breaking real estate statistics in the United States. Unfortunately, most of those stats were bad. Just ask the hundreds of thousands of homeowners who faced foreclosure last year!

On the up side, there is a lot you can do to prevent this kind of real estate misery, and to avoid becoming a negative real estate statistic. Education goes a long way in this regard, and that's why I continue to publish articles like this.

So with that said, here are five ways to be a good real estate statistic in 2008, instead of a negative one:

1. Understand and Guard Your Credit

Good credit has always been important for home buyers who are shopping for a mortgage loan. But it will be even more important this year, and for the foreseeable future. Last year's subprime mortgage crisis has led to tougher regulation of the lending industry. As a result, most lenders (those that are regulated anyway) will be paying closer attention to the credit scores of borrowers.

So your first step is to understand the importance of credit in the real estate world. Your next step should be ordering a copy of your credit report so you'll know where you stand, compared to the average consumer in this country. You should also check your credit reports for errors and work to get them corrected if need be.

You are entitled to one free credit report per year, from all three of the credit-reporting companies. There are several websites you can use (including my own) to request all three reports at once, which is certainly the convenient way to do things.

Also, if your credit score is low -- lower than average, this is -- you should work on improving it. You can do this by paying down your debt, paying all of you bills on time, and being financially responsible in general.

2. Don't Buy Over Your Head

Many of the negative real estate statistics from 2007 were people who bought more home than they could rightfully afford. Of course, some of the lenders were to blame as well, mainly for offering ARM loans with low teaser rates during the introductory period, and glossing over the potential rise in monthly payments that would ensue.

Here's the bottom line. If you can't afford a home, you just can't afford a home. Instead of pursuing dangerously "creative" financing methods to purchase that new home, focus on improving your financial situation first. Reduce your debt. Save up some cash. Try to increase your income, if at all possible. You might even relocate to an area where the housing costs are more within your reach. Heck, that's the main reason I moved from San Diego to Austin!

Avoid buying beyond your financial means. It never ends well, and you will likely end up as a bad real estate statistic instead of a good one!

3. Choose Your Mortgage Type Carefully

In the previous point, I talked about the perils of the adjustable rate mortgage (ARM) loan, for people who don't truly understand the ARM.

Don't get me wrong ... an adjustable-rate mortgage can be a good idea, mainly if you have plans to sell or refinance the home within a few years. In that case, you could save yourself some money by paying lower interest rates in the short term.

Here's the key to success when choosing a type of mortgage loan. First of all, you have to understand the pros and cons of the different mortgage types. Secondly, you have to be realistic about your future plans. If you'll be staying in the home for many years, you might be better off with a fixed-rate mortgage that can weather the financial storms of the future without being affected by them.

Research the different types of mortgage loans, and then match your loan to your home-buying situation and future plans.

4. Don't Trust Lenders ... Or the Government

Here's a real "shocker." Mortgage lenders are in the business of lending money to people, and making a profit while doing so. Surprised by this? I told you it was a revelation! Mortgage lenders will do everything they can to get somebody to borrow from them, as long as they don't get burned in the short term.

So you really can't trust a lender to tell you what you can and cannot afford to pay each month. The only thing a lender can tell you with certainty is whether or not you're qualified for the mortgage ... not whether or not you can realistically afford it. And if they sell the loan to the secondary market after granting it to you, then they don't really have to worry about your financial woes down the road.

But what about the government? Surely they are looking out for home buyers, right? Well, not always. You see, there are these people called lobbyists, and many of them represent the lending industry. They make big contributions to certain political campaigns (like Schwarzenegger and Bush, to name only two) in order to influence regulations -- or the lack of regulations -- on the lending industry as a whole.

So don't expect the government to come riding to your rescue if you get in over your head with a mortgage loan. You must be a smart consumer, an educated consumer, and a self-reliant consumer.

5. Be Proactive in Times of Trouble

Even if you adhere to the other four guidelines on this list, but you still find yourself in trouble, you should be proactive about finding a solution. In other words, don't procrastinate.

Here's an example of what I mean.

Let's say you buy a new home and take on a mortgage loan to pay for it. Everything is fine for the first two or three years, but then you run into some unexpected hospital bills and other expenses. So you get behind on your mortgage payments. But you fully expect to be back on track in a few months.

Here's where it pays to be proactive. If you contact your mortgage lender and explain that your financial problems are only temporary, they probably have ways to help you out.

Generally speaking, mortgage lenders want to avoid foreclosure as much as the homeowner does. After all, they are in the business of loaning money, not managing and selling properties. That's why most lenders will work with homeowners to come up with a solution to temporary setbacks. Some lenders have tools at their disposal to help in such cases, such as repayment plans and lump-sum reinstatements. But you won't know about them unless you're proactive about it.

About the Author
Brandon Cornett publishes several home buying and real estate websites. His latest offers information on Tucson real estate and other popular cities across the U.S.

Henderson, Nevada Real Estate - City in the Spotlight

Imagine living in a city that offered easy access to the world-class entertainment of Las Vegas, while retaining the tranquility and vast beauty of a mountainous desert town.

Henderson, Nevada is just such a city, and it's one of the reasons Henderson appeared on Money Magazine's list of "Best Places to Live" in 2006.

Why Henderson Real Estate?

But what is it that makes Henderson real estate such a good investment for home buyers? Why has the city been referred to as a residential "boom town" in recent years? Well, there are many factors that contribute to the city's growing popularity. So in this article, we will take a closer look at the city of Henderson, Nevada from several angles, to try and determine what makes it such a smart real estate investment.

City at a Glance

• Located about 7 miles southeast of Las Vegas


• Current population (2007) is around 265,000


• Residents of Henderson do not pay personal income tax


• Plenty of college-level educational institutions in the area


• Dry, hot summers and mild winters; very little rainfall

Lifestyle & Entertainment

Henderson, Nevada is close enough to Las Vegas to allow easy access to big concerts and shows. At the same time, it's far enough away to also allow for the peace and tranquility of a vastly beautiful desert setting.

In addition to the world-class attractions of Las Vegas, the city of Henderson offers a variety of concerts, festivals, visual art exhibits and more. There are several facilities in the city to accommodate these events, such as the Henderson Pavilion, Convention Center, and Amphitheatre (three separate facilities).

Henderson Schools & Education

Public schools in Henderson are managed by the Clark County School District (CCSD), which also oversees public schools in Las Vegas. CCSD is the fifth-largest school district in the nation. Several of the schools in this district are have receive top ratings from websites such as GreatSchools.net.

At the collegiate level, there are plenty of educational opportunities in and around the city of Henderson, Nevada. The University of Nevada (Las Vegas) is located in nearby Paradise, Nevada, an easy commute from Henderson. The College of Southern Nevada has a campus located in Henderson, as does Nevada State College.

Tax Advantages for Residents

Residents of the city do not pay personal income tax, inheritance tax, corporate tax, estate and/or gift tax. You can't complain about that! In addition, the property taxes in Henderson (and in Nevada as a whole) are comparatively low. According to Money Magazine, the state of Nevada has the eighth lowest tax burden (when compared to statewide income) in the United States.

The Climate in Henderson, NV

Like much of Nevada, the city of Henderson has a desert climate with very little natural water. In fact, the only natural water within the city comes from washes like Duck Creek. There is very little rainfall in the city -- an average of only six inches per year.

The average high in July is 108 degrees Fahrenheit. The average high the coldest months is 60 degrees. The winters do get below freezing from time to time, mostly in December and January. Like most desert climates, the temperature in Henderson can drop significantly from the high temps of day to the lowest temps at night.

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Brandon Cornett is the publisher of TheAgentNet.com, which provides information about U.S. cities from a real estate and lifestyle perspective. Learn more about Henderson real estate and many other great cities at http://www.theagentnet.com

Birmingham Real Estate - City in the Spotlight

Birmingham, Alabama is a great place to live and work. The city is rich with history and culture, and the consistently strong economy helps make Birmingham real estate a good financial investment.

So in this city profile, we will take a closer look at the city of Birmingham, Alabama from several angles, such as education, lifestyle, real estate and more.

Birmingham's Climate & Weather

Being located in the Deep South of the United States, Birmingham has a humid climate. Actually, in scientific terms, the climate here is considered to be subtropical (meaning hot summers and plenty of rainfall). The city averages about 52 inches of rain each year.

The Birmingham winters could best be described as mild to chilly. In January, one of the coldest months, the average daily high is around 53 degrees Fahrenheit, and the average low is around 32 degrees Fahrenheit.

Basic City Stats - Population, Geography, Etc.

Birmingham is the largest city in the state of Alabama. The city lies partly in Jefferson County and partly in Shelby County. Birmingham is the county seat of Jefferson County, Alabama. Geographically speaking, Birmingham is located in the north-central part of Alabama.

To chart the population growth of Birmingham, Alabama, one simply has to compare data over the last few years. In 2000, the population was around 242,000 in the city of Birmingham. Six years later in 2006, the population had actually decreased to about 230,000 in the city.

Today, in 2008, the population has gone back up again and is currently estimated at just over 242,000. So when you consider the last eight years, the population of Birmingham has more or less stayed the same (with a few ups and downs).

Note that these numbers pertain to the city alone, and not to the entire metro area of Birmingham. When you consider the entire metropolitan area of Birmingham, Alabama, the population is well over one million people.

Schools In and Around Birmingham, AL

You can't talk about real estate in a particular city without talking about the city's schools. After all, schools play a major role in property values (in addition to being a quality of life concern). So let's take a quick look at the school situation in this city.

Within the metropolitan Birmingham area, there are three universities, three colleges, four junior colleges, three technical schools, four business schools, and 276 public schools. As you can see, there is plenty of educational opportunity in and around Birmingham, Alabama, which makes a real estate investment much more sound (not to mention boosting the quality of life).

K-12 schools are operated under the purview of the Birmingham Public Schools, which consists of eight elementary schools, a district-wide school for grades 3-8, two middle schools, two high schools, and several alternative programs. In all, these schools serve more than 8,000 K-12 students in Birmingham, Alabama.

At the collegiate level, there are some excellent institutions in Birmingham, including the University of Alabama at Birmingham (also a major employer in the city), Samford University and the University of Montevallo (just south of Birmingham in Montevallo. AL).

Employment & Economy

The largest employers in the city are the University of Alabama at Birmingham, Baptist Medical Centers, BellSouth, and Jefferson County Public Schools. The steel industry also plays a big role in the city's economy, and many jobs can be attributed to steel production and processing facilities.

The Birmingham metropolitan area is consistently ranked as one of America's best places to work, based in part on the salary rates in the area (combined with the relatively low cost of living). In fact, a 2006 study by Salary.com ranked the city #2 on a list of best places to live for building personal net worth!

Should You Buy Real Estate in the Birmingham Area?

Should you buy a home in Birmingham, Alabama? This is a question that only you, as the homebuyer, can answer for yourself. Every city in the U.S. has its pros and cons, with regard to quality of life, real estate values, and other factors. And this applies to Birmingham just as well. Hopefully, however, this guide has given you a better insight into this wonderful southern city.

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Brandon Cornett is the publisher of TheAgentNet.com, which provides information about U.S. cities from a real estate and lifestyle perspective. Learn more about Birmingham real estate and many other great cities at http://www.theagentnet.com

Home Buying Step #1 - Study the Process

If you're about to enter the home buying process for the first time, one of the best things you can do is to study the overall process of buying a home.

By understanding the steps to buying a home, you will be gaining several benefits at once. For one thing, you'll be able to prepare for the process by knowing what steps are involved. This is important, because many of the steps you go through later on require preparation in advance.

Let's look at an example of this:

At the closing process, you will have to pay certain fees that are collectively known as closing costs. These include attorney fees, loan origination fees, document preparation, etc. So it's important to start saving money early on the home buying process. Of course, the only way you would know about these expenses -- and be able to prepare for them -- is by becoming familiar with the entire home buying process.

The second benefit to studying the home buying process is that it will help you identify knowledge gaps. For example, making an offer is obviously a big part of the home buying process. So if you're not sure how this process works, you can do further research into it.

But once again, the only way to know where your knowledge gaps lie is to study the entire home buying process.

Lastly, understanding the overall process will help you choose the best type of mortgage loan for your unique home-buying situation. This is where many home buyers make mistakes that come back to haunt them later on. Perhaps they choose the wrong type of loan for their situation, or maybe they get in over their heads with a high interest rate.

The first and most important step to buying a home is to study the overall process, find out where you knowledge gaps are, and begin filling in the blanks accordingly.

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Read all 101 steps to buying a home
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Nashville Real Estate - City in the Spotlight

Nashville, Tennessee is a great place to work and live. It's also a great place to buy a home, and it comes up on a lot of those "best places to live" lists.

For example, in 2006 Kiplinger.com created a list of "50 Smart Places to Live." They used several criteria to create a list of cities there were a good real estate investment. Nashville made the top of the list, ranked #1 by the editors.

Why Nashville, Tennessee Real Estate?

So what makes Nashville a great place to buy a home? Well, lots of things actually. So in this city profile, we will take a closer look at just what makes Nashville tick -- and what makes it such a smart real estate investment.

Lifestyle & Entertainment in Nashville

When you mention the city name of "Nashville," most people immediately think of country music. Obviously, there's plenty of it to be found in Nashville. But the city also enjoys a wide range of musical influences and venues. In fact, if you go downtown on any given Saturday night, you can probably sample some live country music, jazz, rock or R&B, all within a short walk of one another.

The Parks Department of Nashville offers a variety of facilities and programs for the city's residents to enjoy. The Department manages more than 100 individual properties (parks, nature centers, swimming pools, trails, etc.) as well as seven municipal golf courses. Whether you're interested in joining a local sports league, or you just want a nice place to jog or walk the dog, The Metro Parks and Recreation Department has something for you.

Schools & Education

You can't talk about real estate in a particular city without talking about the city's schools. This is obviously an important topic for parents with school-aged children. But it's also important from a real estate investment standpoint, as the quality of schools will play a major role in property values. Fortunately, the educational scene in Nashville is both strong and diverse.

Public schools in Nashville are operated under the purview of the Metropolitan Nashville Board of Education. This school system manages a total of 136 schools -- 74 elementary, 35 middle, 16 high schools, 4 alternative learning centers, 4 special education, and 3 charter schools.

At the collegiate level, there are quite a few educational institutions in and around Nashville, Tennessee. In fact, the city is sometimes called the "Athens of the South" because of the high number of colleges and universities in the area. These include Vanderbilt University, Tennessee State University, and variety of other colleges and training institutions.

Employment & Economy

Buying real estate in a city without evaluating the economy is like driving while blindfolded. So let's take a look at the economy and employment situation in Nashville, Tennessee.

The music industry employs a lot of people in Nashville. Most of the major music labels such as Sony, Universal and Warner have offices in Nashville. Many smaller labels have also set up shop in the music-driven city. So music recording and production plays a big role in Nashville's economy.

While music is the best-known aspect of Nashville's economy, healthcare is actually the city's largest industry segment. More than 200 healthcare companies are located within the Nashville metropolitan area. According to a 2006 issue of The Tennessean, the healthcare industry has contributes more than 90,000 jobs for Nashville residents, a much larger contribution than any other single industry sector.

As a major city of the south, Nashville also enjoys many other types of industries as well, ranging from finance to publishing (and many things in between).

Should You Buy Real Estate in the Nashville Area?

Should you buy a home in Nashville, Tennessee? In reality, this is a question that only you, as the homebuyer, can answer for yourself. All cities have certain pros and cons with regard to real estate values, quality of life, etc. This applies equally to Nashville. Hopefully, however, this guide to Nashville will help you move closer to answering that question!

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Brandon Cornett is the publisher of TheAgentNet.com, which provides information about U.S. cities from a real estate and lifestyle perspective. Learn more about real estate in Nashville and many other great cities at http://www.theagentnet.com

Foreclosure Solutions - 3 Ways to Avoid Foreclosure

The number of home foreclosures in the United States have reached an all-time high. This is probably not news to most homeowners. After all, you hear about it on the news all the time.

But many people are less familiar with the various ways you can avoid having your house foreclosed on in the first place. In reality, there are several foreclosure solutions that homeowners can pursue. Which path you choose will depend upon your unique financial circumstances.

Solutions for Avoiding Foreclosure - Two Flavors

The first thing we must establish is that, generally speaking, there are two paths you might take here. Which path you take will depend on whether your financial problems are only temporary, or if they are more long-term in nature:

• If your financial troubles are short term, then the best foreclosure solution is to avoid foreclosure altogether by getting back on track with your mortgage payments.
• If your financial woes are more long-term, then your foreclosure solution will likely involve selling the house in lieu of having it foreclosed upon, probably through a short sale technique.

In this article, I'd like to talk about the first scenario listed above. Let's use some hypothetical homeowners for this foreclosure solution scenario -- we'll call them John and Jane Doe. In this scenario, John and Jane are merely having temporary financial issues, and these issues have put them behind on their mortgage payments.

But things are now looking up for John and Jane now, from a financial standpoint. So they are eager to get back on top of their mortgage payments and avoid home foreclosure altogether.

The first thing that John and Jane should do (if they haven't already) is get in touch with their mortgage lender. The lender can help them identify a feasible solution for getting caught up on their payments. These are often referred to as mortgage "workout" solutions -- ways to get back on top of your mortgage payments to avoid foreclosure.

So John and Jane have a meeting with their mortgage lender Sally Smith, and Sally explains some of the ways they might be able to get back on track with their mortgage payments. Sally presents the following solutions for foreclosure avoidance:

• Reinstatement -- This is a way to pay off the back payments as a lump sum, usually by a mutually-agreed-upon date in the future.
• Repayment plans -- With this type of solution, you work with the mortgage lender to create a payment plan, through which you will get caught up on your mortgage. Basically, this plan takes the money owed from missed payments and spreads it out over future payments.

With the reinstatement solution, you will pay off your back debt as a lump sum by some future date. With the repayment option, you will pay off your back debt a little at a time, by spreading over your future mortgage payments.

These are just two solutions for avoiding foreclosure on a home. Both of these options apply to situations where the financial problems are only temporary, and the homeowners intend to keep the home. There are other options as well.

So here are the key points to take away from this lesson:

• There are certain foreclosure solutions available to you.
• The path you take will often be determined by the short-term vs. long-term nature of your financial problems.
• Different mortgage lenders will offer different solutions for avoiding foreclosure and getting caught up.
• You should contact your mortgage lender as early as possible to work toward a common solution.
• Mortgage lenders are willing to help -- and would like to avoid foreclosing on the home as much as you'd like to avoid it.

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Learn more about how to stop foreclosure on a home
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Short Sale 101 - Buying a Home Through Real Estate Short Sale

Article summary: An explanation of real estate short sale techniques, from the perspective of the home buyers. How this technique relates to buying a home.

The short sale has become an increasingly popular real estate tactic in recent years. But what is a short sale and how can a home buyer use it purchase a new home? These are the questions we will answer in today's article.

First, let's start off with a basic definition of the short sale as a real estate selling strategy:

Short sale - (noun), A real estate sale where the sale price is less than what the seller still owes to the lender via the mortgage loan.

In other words, the seller will sell the home for less than what he or she owes to the lender, and the lender will agree to accept this amount from the homeowner and "forgive" the remainder still owed. That is the basic definition of a short sale in real estate terms.

A Way to Avoid Foreclosure

The question most people have is this. Why would a lending institution accept less than what it is owed from a homeowner. Don't they lose money that way? Well, yes and no.

You see, the short sale is most often used as a way to avoid foreclosure on a home. As the name "short sale" implies, it's a way to sell the home quickly when the homeowner is in financial trouble and facing foreclosure. Thus, the short sale is one of several ways a homeowner can avoid foreclosure on the home.

Mortgage lenders will also want to avoid foreclosure, as much as possible. Lenders are in the business of loaning people money -- they are not in the business of managing properties, marketing them, selling them at auction, etc. These cost the mortgage lender money they don't want to spend. And that's why they often agree to accept a bit less than what is owed to them, as long as the homeowner can sell the home quickly by way of a short sale.

By listing the home below its market value, it's a safe bet that the home will sell quickly. And this is where the home buyer comes into the picture.

Tracking Short Sales for Home Buying Purposes

Many real estate investors keep track of homes going into foreclosure, because that is the first step to buying a home through a short sale (and possibly paying less than market value).

Editor's Choice - RealtyTrac

Keeping track of short sale foreclosures will open up a world of investment opportunity for you. For this, we recommend (and use) RealtyTrac. Check out their offer below! ~Brandon Cornett, Editor, Home Buying Institute




Search our list of nationwide foreclosure listings.

So whether you intend to live in the home, or turn around and sell it for a profit, it's always good to buy a home for less than market value! And who doesn't like to save money?

The key here is to know about a real estate short sale and/or pending foreclosures as soon as possible. After all, you won't be the only one trying to benefit from the reduced price of a home sold through a real estate short sale technique ... there will be others out there looking as well.

So what you need then is a service that tracks foreclosures in your area and notifies you of these investment opportunities as soon as possible. There are many web-based services you can sign up for that will do this very thing for you. But there is one that stands out above the rest, in my humble opinion. And that is RealtyTrac.

Editor's Choice for Foreclosure Tracking

If you plan to track short sales / foreclosures as an investment opportunity, I highly recommend you check out the web-based services of RealtyTrac. Like I said, there are many of these types of services out there, but this one is simply superior in my mind.

Here's what I like about it:

• The web interface is simple to use
• The foreclosure data is updated often and highly reliable
• You can set up tracking parameters and receive notifications by email
• They offer a free trial so you can "try before you buy" ... a must!

I've gushed over this service enough. There's nothing left for you to do except to try it for yourself. And what better way to try it out than for free?

Good luck shopping for real estate short sales!

-Brandon

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Countrywide Home Loans Goes to Bank of America

Ah, the saga continues. In the latest installment of "As the Mortgage Industry Crumbles," Countrywide Home Loans are no more. Bank of America announced today that it plans to buy Countrywide Financial for a $4.1 billion stock transfer.

Up until recently, countrywide was the largest mortgage lender in the country. But this year, they became the latest "victim" of the mortgage crisis that came to a head over the last few months.

How many Countrywide home loans have been made over the years? Consider this. As of August 2007, Americans owed around $13 trillion (with a 'T') in mortgages, and Countrywide Home Loans accounted for around $1.4 trillion of that amount -- a larger "slice" than any other single lender, by far.

But record-breaking home foreclosures put a major hurt on Countrywide home loans (and many other lenders). So the company that has been financially ailing for some time is now slated to be sold to Bank of America.

In a typical feel-good statement, BOA chief executive Ken Lewis said that:

Countrywide presents a rare opportunity for Bank of America to add what we believe is the best domestic mortgage platform at an attractive price and to affirm our position as the nation’s premier lender to consumers.

What does this mean to homeowners and borrowers? Well, it means two things:

• With the loss of Countrywide home loans and others such as Ameriquest, home buyers will have fewer options when shopping for a home loan in the future.
• It also means that, because of the increased scrutiny placed on the lending industry, home loans will be harder to obtain. Generally speaking, home buyers will need better credit to obtain a home loan than in the "easy lending" days of the past.

Want to learn more about Countrywide home loans and the sale of Countrywide Financial to Bank of America? Here's the latest information from the Web.

5 Real Estate Lessons From 2007

No matter how you measure it, 2007 was certainly an interesting year for real estate across the United States. We saw the typical highs and lows of real estate fluctuations, and then we saw what the news media has labeled a mortgage crisis.

In truth, the full effects of all this are yet to be seen. But we can certainly cast our attention backward and see things in the perfect clarity of hindsight. In the spirit of hindsight, here are five real estate lessons from 2007.

1. Subprime Mortgages Are a Bad Idea

Okay, so I'm generalizing here. Not all subprime home loans lead to heartache. But looking at the numbers from 2007, it's pretty clear that subprime mortgage lending in general is a bad idea.

While the average consumer learned this lesson over the last year or so, economists had actually been issue warnings against the subprime industry since the 1990's (when that industry was booming). In fact, they predicted exactly what we are seeing right now -- home foreclosures in record numbers.

And that brings me to the next lesson we learned about real estate in 2007...

2. You Can't Rely on the Government for Help

We just talked about the warnings from economists in the 1990's, about the future perils of subprime lending gone wild. So why didn't our government do something to curtail the "easy lending" practices of these lenders? The same reason as usual -- money. In fact, if you follow the money trails (which are public record by the way), you can see how certain subprime lenders donated a lot of money to certain governmental campaigns.

3. Use an ARM Loan With Caution

The adjustable rate mortgage (ARM) went hand-in-hand with the subprime lending practices that were so common in the 90's through the early 2000's. People credit problems were offered mortgage loans with low interest rates up front, but with the uncertainty of a future adjustment on that interest rate.

Some borrowers understood the concept of the ARM loan, and would either refinance or sell the home before their mortgage reset to a higher interest rate. But even more borrowers failed to understand this concept, and were shocked to see their mortgage rates shoot up after three years or so.

Here's where consumers and lenders share part of the blame. It's up to lenders to educate consumers on the future risks of an ARM loan (instead of closing as many loans as possible and letting borrower's sink or swim). It's also up to consumers to educate themselves about these things, so they can choose the best type of mortgage loan for their financial situation.

4. If You Can't Afford a Home, You Can't Afford a Home

It would be great if everyone in this country could afford a home. But that is simply not the case. People with financial problems, poor credit, and uncertain income should probably avoid the extra financial burden of buying a home. Instead, they should focus on shoring up their credit, getting control of their finances, saving money, etc.

If you strengthen your financial house first, your actual house will set on a more stable platform -- a platform of financial security.

5. Good Credit is More Important Than Ever

Going forward, into 2008 and beyond, home buyers will be placed under greater scrutiny by mortgage lenders. This is a direct result of the mortgage "crisis" that came to a head in 2007. Tougher regulations have been imposed on many lending institutions (especially the subprime bunch), so the "easy lending" days of the past are gone. At least for a while.

So it's more important than ever for home buyers / mortgage shoppers to have better credit scores going forward. It's also wise to pay down unnecessary debt, such as credit card balances, to achieve a more favorable debt-to-income ratio. Lenders will be looking at these things much more closely in the future, so you've got to have your financial ducks in a row.

A Better Credit Score in 2008

Article summary: Achieving a better credit score will serve you will in 2008. This article explains why by taking a look back over past years.

In 2007, the world of credit and lending was turned upside down. It was actually a long time coming, but the mortgage lending "meltdown" all came to a head in 2007. And now, in early 2008, we have yet to see the full effects of this.

But one thing is certain. This credit and lending crisis has made it even more important for consumers to have good credit. By this, I mean that you should thoroughly review your credit report for accuracy and find ways to boost your credit score if it is lower than the national average (or even if it's just plain average). Here are some tips for a better credit score through fiscal responsibility.

Editor's Choice - Get Your Credit Report

If you want a safe and secure way to request your credit report, check out the offer below from Credit.com (one of the most trusted names in credit reporting information).

In other words, as a modern consumer you must keep credit in mind when looking back as well as when looking forward.

Let's look at an example of why this is important. Let's jump into our time machine and go back to the mid 1990's:

Man, it sure is easy to get a home loan here in 1995. It seems like anyone can qualify for a mortgage, no matter how bad their credit is. They've got these things called subprime mortgages that make it really easy for people to get qualified and buy a home, and they have pretty good interest rates in the first years ... something about an adjustable rate mortgage.

Now let's travel back to the present:

Ouch. That subprime loan sure came back to bite me. As it turns out, that attractive interest rate didn't stay around for long. After three years, my mortgage reset to a higher rate -- a much higher rate -- and I just wasn't able to afford the payments anymore. The bank foreclosed on my home, and from watching CNN I gather that there are a lot of other folks in my situation.

Yes, there are a lot of folks in this situation right now. So many, in fact, that the federal government has increased its scrutiny of lending practices. Back in the 90's, many government officials were happy to ignore the economists who predicted future doom from "easy lending" practices. The money that mortgage industry lobbyists contributed to various campaigns made it easy for these government officials to turn a blind eye and ignore the prognostications.

And now what are we seeing? Now that the doom and gloom has become a reality, all of the politicians are getting on record as saying: "How did this happen? Ooh, those evil mortgage lenders just burn me up. They must be regulated!" But all you have to do is follow the money trail to see how many of these same politicians ignored the warnings of a mortgage crisis years ago.

Alas, I digress. Let's get back to consumer credit issues, why it's important for you to keep a better credit score in 2008 (among other worthy resolutions).

My point is this. As a consumer, it is more important than ever that you maintain good credit and be cautious about your spending. Lending institutions (those that are regulated anyway) have tightened their restrictions on lending. Thus, it's tougher to get a mortgage loans these days, or a line business credit, or any other form of financing for that matter.

So having a better credit score will open more doors for you.

Be cautious about your spending. Research all of your financial moves so that they are wise moves. Get a copy of your credit reports and scores to see where you stand. Work hard to strengthen achieve a better credit score this year. Make it a year of financial responsibility.

Buying a Home in Foreclosure

As the winds of foreclosure continue to sweep across the United States, they bring hardship as well as opportunity.

Obviously, the hardship is felt by the homeowners who are foreclosed upon. After all, what could be worse than losing your home due to a mortgage foreclosure. On the other hand, there are home buyers and investors who see buying a home in foreclosure as a great opportunity to save money on a property.

When it comes to foreclosed properties, one person's loss is truly another person's gain.

So if you're one of those people who see buying a home in foreclosure as an investment opportunity, we have some tips for you.

• The first thing you should do is research the foreclosure process in your state. Understanding how homes get foreclosed upon is the first step to success with buying foreclosures.
• Next, you'll want to sign up for a tracking service that alerts you to new home foreclosures in your area. After all, you can't make an offer on a property or follow it to auction if you don't even know it's been foreclosed on. Check out our editor's choice for foreclosure tracking services.
• Have your financing in order. Foreclosure homes go fast these days. You're not the only one who has been watching the news and noticing all of the foreclosed homes on the market. If you don't have ready access to financing, you could get beat out by a more "liquid" investor who is buying foreclosure homes in your area.
• Learn the real estate auction protocol. The obvious reason investors buy foreclosed homes is to get a property for less than market value. But if you start a bidding war at a foreclosure auction, you could drive up the price and defeat the whole purpose.

I hope this brief tutorial on buying homes in foreclosure helps you to make smart financial decisions and good investments. Good luck out there!

5 Tips for Buying a Home in 2008

Wow! What a year for the real estate and mortgage industries. When people look back on 2007 from a business and financial perspective, they will likely recall the subprime mortgage "meltdown" that has yet to play out.

The whirlwind of media coverage that has surrounded the subprime crisis leaves many home buyers scratching their heads. "What does all the mean to me," many buyers want to know. "What lessons should I take away from all this?"

With an eye on current events, I offer you the following tips for home buying in 2008.

1. Boost Your Credit Score

Credit is everything when it comes to home buying. Many of the people who became foreclosure statistics in 2007 got there because of subprime ARM loans -- the only type of loan they could afford given their bad credit. So focus on maintaining or improving your credit score in 2008. The first step to this is getting a free copy of your credit report and score, to review them for accuracy and overall "health."

2. Understand the Different Mortgages

Don't rely on a mortgage lender to tell you what you need to know about the various types of mortgage loans. Mortgage lenders make money by selling mortgages, so that is their primary focus -- selling you a home loan. It's up to you to understand the pros and cons of different mortgage types, and how they will affect you in the long run.

3. Know Your Real Estate Market

At the time of this writing, many real estate markets across the U.S. are experiencing a major slow down. This might mean that buyers can get a good deal on a home, and then profit from the appreciation / equity when the market swings back up again. The key to making a wise home-buying decision comes, in part, from understanding your local real estate scene. The "Homes" section of your local newspaper is a great place to start.

4. Reduce Your Debt

If you decrease your debt while keeping your income steady, you will have a more favorable debt-to-income ratio, which is one of the things mortgage lenders consider when approving people for home loans. That's one of the many reasons to pay down debt. Start with those credit card balances, since they probably have the highest interest rate of all your debt items.

5. Increase Your Savings

It's always a good idea to increase the amount of money you put away each month, but it's an even smarter idea if you plan to buy a home in the near future. Mortgage lenders will check to see how much cash you have readily available, because they know you'll have to cover closings costs when buying a home. Start putting money away as early as possible.

All of these tips can be summed up in one simple statement -- be a smart consumer. Many of the people who suffered under the mortgage "crisis" of 2007 were not smart consumers. They overspent and made shortsighted financial moves. Hence, they became statistics in a negative way. Follow the tips above, and you can avoid joining their ranks!

The Mortgage Crisis of 2007 - A Love Story

In the future, when people cast a financial and historical eye back to 2007, one thing will clearly stand out, and that is the mortgage "meltdown" that came to a head during that year.

In truth, the full effects of this mortgage and lending crisis are yet to been known, even as I write this article in January of 2008. People are, however, beginning to toss the dreaded 'R' word around ... Recession.

And why shouldn't they? Abroad, we are spending money we don't have to fight the seemingly endless "war" in Iraq. While at home we are experiencing the so-called mortgage meltdown -- the worst in recorded financial history. It sure smells like a potential recession.

But this article isn't about recession. It's about love.

You see, many people don't realize that the mortgage crisis of 2007 is really a love story. In fact, there are many different types of love overlapping here. It's just one big love-fest! Consider the following types of love that are present here:

• We American consumers love to buy, even when it's not wise to do so.
• American corporations love to profit from the consumers who love to buy.
• Government officials love to be paid for the trouble of looking the other way.

Looking Back - A Love Story Unfolding

Through the mid 1990's and early 2000's, the number of subprime mortgage loans rose significantly. A subprime loan is basically a loan made to somebody who really shouldn't be taking on the loan. But the loan is made possible out of love. The lenders love to charge high interest on consumers with bad credit, and those consumers love to buy things (in spite of their bad credit).

Some mortgage lenders fell so deeply with this type of lending (and the profits it produced) that they began to focus on it exclusively as a business model. Thus they became known as subprime lenders, and they saw this as a chance to outmaneuver competitors by extending loans to borrowers that their competitors were turning away.

Economists, who love the truth and the data that supports it, began to warn against this practice. So some states began to pass restrictions against certain types of subprime lending.

Ah, but those state politicians also love lobbyist dollars. So they found themselves torn between two loves -- the love of doing the right thing, and the love of money funneled in from the mortgage industry itself. For example, consider the fact that Governor Arnold Schwarzenegger of California received well over a million dollars* from associates of Ameriquest (one of the largest subprime lending companies).

Incidentally, California is one of the states hit worst by the mortgage crisis. Lots of love in California!

So this is yet another example of a politician who loves to receive support from large corporations -- corporations that, in turn, love to shape our country's laws with some good old-fashioned greasing of skids. I loved Arnold in the original Conan movie, by the way, but I don't love him so much as a Governor.

The Love is Spreading All Around Us

The love of money, buying, selling and lobbying has created a mortgage crisis of truly epic proportions. And like any good financial crisis, it has spread to other areas. When consumer lending tightens, business credit and financing usually follows suit. Just listen to what a recent New York Times article had to say about it recently:

"Credit flowing to American companies is drying up at a pace not seen in decades, threatening the creation of jobs and the expansion of businesses, while intensifying worries that the economy may be headed for recession."

At the same time, we are seeing the dollar weaken against foreign currencies around the world. We should be alarmed by this! We should press for change! We should curtail spending! We should question the White House's maniacal love for overspending on fruitless ventures like the war in Iraq. We should ask the question, "How long until the United States goes broke?" But there is another type of love that lulls us into complacency...

Politicians at the highest level love to offer encouragement by playing down the true severity of our financial crisis. They love to soothe us the way one might soothe a child who is teething...

And we just keep swallowing it right up. Because love is blind.

* Sources: Federal Election Commission; National Institute on Money in Politics; Center for Public Integrity; state disclosure offices.

Poor Credit Home Loans - Beware

I just finished my weekly Internet research to see which credit and home buying topics are the most popular (judging by the number of Internet searches for those phrases).

The phrase poor credit home loans is still high up on the list. This means that a lot of home buyers -- presumably with bad credit -- are wondering what their home loan options are.

Here's where I offer a word of caution. Getting a home loan with poor credit means that you will likely be getting a subprime mortgage loan. And if you've been paying attention to the news over the last few months, you'll know the subprime home loans have been a hot topic lately ... and for a bad reason.

Subprime lending has led to a "mortgage meltdown" over the past year or so. The media is also fond of the phrase mortgage crisis and other doomsday terminology. When lenders extend home loans to people with poor credit history, they do so by jacking up the interest rate. After all, these people have far fewer options when shopping for a loan that a person with excellent credit. They basically have to take what they can get.

This means they will pay a much higher interest rate on the loan.

Now we come to another piece of the mortgage "crisis" -- the adjustable rate mortgage. When lenders offer subprime loans to borrowers with poor credit, they often do it through the adjustable rate mortgage (ARM) loan. This type of home loan starts off with a lower interest rate (than a fixed-rate mortgage), but it will eventually adjust or "reset" to a higher interest rate.

In the case of subprime borrowers (who are already in a high-interest situation), this adjustment to an even higher rate can be the death blow to their homeownership.

Right now, this is happening in record numbers across the United States. Poor credit home loans are resetting to higher interest rates ... the homeowners can no longer afford the mortgage payments ... the lender forecloses on the home ... and thus you see the subprime mortgage "meltdown" / "crisis" that we are experiencing.

Now, this is not to say that all poor credit home loans are bad. But if you are a home buyer with bad credit, you really need to do some homework:

• Determine your maximum budget for a monthly mortgage payment.
• Shop around for a home loan and see what kind of interest rate lenders will offer.
• Find out if the offered interest rate is on a fixed-rate loan or an adjustable mortgage.
• Before choosing an adjustable rate mortgage, read this guide to ARM loans first.

Of course, the best thing you can do it improve your credit score altogether. This will help you secure a lower interest rate on your home loan and lower the mortgage payment as a result.

I hope this guide to poor credit home loans helps you in your quest to purchase a new home responsibly. Good luck with your home buying ventures!

P.S. -- If you're not even sure where you fall on the credit scale, you'll want to get a copy of your free credit report and scores.