Fannie Mae is offering help to military families struggling to make their mortgage payments. The programs will help struggling military families avoid foreclosure by offering a forbearance of up to six months if an active-duty service member dies or is injured, creating a financial hardship for their family.

Mortgage loan help

Fannie Mae is also creating a hotline for military families to call if they need help with home loans. If you need help staying out of foreclosure, the number for the hotline is (877)MIL-4566. Mortgage loan specialist will discuss your options for getting help with a mortgage loan.

Jeff Hayward, Senior Vice President of Fannie Mae’s National Servicing Organization, said in a statement:

The men and women of the Armed Forces have shown extraordinary commitment to our country while facing unique challenges as a result of their service. No family impacted by a death or injury in the line of duty should have to face the additional burden of foreclosure as a result of the hardship. We want to do all we can to provide support to these families at a time of need as we honor their sacrifices and service to our country.

Help for families

Families who seek help with their mortgage and receive a forebearance, also will have credit bureau reporting suspended during that time. That will allow them to recive assistance without having it negatively impact their credit.

Many military families struggle financially, especially when one spouse is deployed overseas. Others, faced with multiple relocations, end up with high levels of debt. In some cases military families rely on credit cards and payday loans to cope with bills, escalating the cycle of debt. In 2007, a law was passed to cap interest rates on payday loans at 36% for members of the military.

To complicate matters, some new veterans have difficulty finding employment. The unemployment rate for veterans is about 14.7%, according to Daily Finance, compared with 9.6% for the entire U.S.

Do you need to improve your credit score to qualify for a mortgage loan? Whether you want a mortgage to refinance or purchase a home, it’s important to straighten out your finances before filling out a loan application. Here’s what you need to do.

• Ditch credit card debt. This is one of the smartest things you can do to boost your credit score. Mortgage lenders won’t approve you for a home loan if your debt-to-income ratio is too high. Debt payments should account for no more than 36% of your income, and mortgage debt shouldn’t be any higher than 28% if you expect to qualify for the best mortgage rates.
• Pay your bills on time every month. Consistently being late with bill payments lowers your credit score. Read your monthly statements carefully so that you are aware of the date and time that payments are due. Payment history accounts for 35% of a FICO score.
• Avoid running up balances on existing credit cards or lines of credit. Even if you have enough income to pay off your debts at the end of the money, running up credit lines may mark you as a credit risk with mortgage lenders. Put the kibosh on new purchases at least until after you get approved for a mortgage.
• Check your credit report for errors. It’s not uncommon to find inaccurate or outdated information on credit reports. Dispute any problems that you find with the credit agency by calling and following up with a letter. If necessary, contact creditors to straighten out problems. Review your report again after your dispute has been settled to make sure everything has been updated.
• Keep your oldest credit lines open to show that you have an established credit history. While it makes sense to close unused credit lines if you don’t want to be tempted by them because of a history of overspending, wait to do so until after you get a mortgage. If you’ve had a long history of managing credit well, it can help lift your credit score.

Free Credit Reports

Request a free copy of your credit report at www.annualcreditreport.com. You can get one free copy every 12 months from Equifax, Experian, and TransUnion. Review it carefully and take time to fix any problems in order to qualify for the best possible deal on a home loan.

Think the rich are immune to the housing crisis? You would be wrong. According to the New York Times, “more than one in seven homeowners with loans in excess of a million dollars are seriously delinquent.”

Walking Away from Home Loans

CoreLogic compiled data that indicate that people with less expensive homes are more likely to continue making payments to mortgage lenders. “Though it is hard to prove, the CoreLogic data suggest that many of the well-to-do are purposely dumping their financially draining properties, just as they would any sour investment,” the article states. Sam Khater, CoreLogic’s senior economist, was quoted as saying, “The rich are different: they are more ruthless.”

Strategic mortgage defaults have become more common as the housing market has struggled to recover. Some homeowners have simply stopped paying on mortgage loans because  they see no point in putting money into properties that have lost significant value. It’s not that they can’t afford to make payments on home loans, they just don’t want to.

Falling Home Prices

According to a recent article on Freddie Mac’s Web site, many strategic defaulters live in states where housing prices have suffered huge drops. Walking away from homes, the article argues, hurts entire communities in the long run:

That’s because strategic defaults affect many other families and communities. And these costs – or as they are known in economic jargon, externalities – are not factored into the individual borrower’s calculations.

Let’s start with the neighbors. When strategic defaults occur, homes go into foreclosure and sit vacant for some period of time. We know from experience that foreclosures and vacancies drive down the property values of everyone else in the neighborhood. Thus, strategic defaulters, in effect, deplete the personal wealth of their neighbors. 

Average Joe and Jane

Ultimately, it’s the average homeowner who is likely to be affected the most. A middle-class family that loses a home through foreclosure is likely to struggle for years to rebuild a stable financial situation.

Defaulting on Mortgages and Still Living Large

When people with million-dollar properties default on home loans, they often continue to have access to other financial resources and investments. They may even have a second or third home to move into and continue to live a pretty comfortable lifestyle.

Avoid Defaulting on a Mortgage

Whatever your income level or home’s value, it’s best to do everything you can to avoid defaulting — strategically or otherwise. Alternatives to strategically defaulting include resigning yourself to making mortgage payments even if you’ve lost a lot of home equity and waiting for the market to recover.

You could also try to refinance your mortgage loan to lower your payments and interest. Finally, if necessary, do whatever is necessary to sell your home to get rid of mortgage payments.

About 65% to 75% of mortgage loans modified through the government’s loan modification program but not backed by the federal government are expected to go into default, according to a report from credit-rating agency Fitch Ratings.

Too Much Debt

The report said that the main reason many home loans modified through the Home Affordable Modification Program (HAMP) are expected to go bad is because borrowers don’t receive help with other debt problems.

“Many of these borrowers still have very heavy levels of other debt, auto loans, credit cards and other expenses” Diane Pendley, a Fitch managing director, told CNNMoney. “We’re talking borrowers who don’t have cash reserves. If they did, they wouldn’t be in this position in the first place. It doesn’t take much for them to get in the same situation again.”

Mortgage Lenders Foreclose

A homeowner who defaults on a home loan that has been modified is likely to face foreclosure.  Mortgage lenders are probably not going to give homeowners a second modification deal.

Asking for a Short Sale

Homeowners who find themselves in the position of defaulting on a mortgage loan that was previously modified, may be able to negotiate a short sale. A short sale occurs when a mortgage lender agrees to let you sell a home for less than what is owed on it. Mortgage lenders sometimes agree to short sales rather than deal with foreclosing on a property mortgage loan.

If you are about to default on a home loan that has been modified consider the following things that could help you arrange a short sale:

• Mortgage lenders are more likely to approve a short sale if you already have a buyer lined up
• It may take several attempts to contact your mortgage lender before getting approval for a short sale
• You must provide all documentation requested as soon as possible if a short sale has been approved

Arrange a Deed-in-Lieu Deal

In some cases you may be able to get your mortgage lender to agree to a deed-in-lieu deal. That occurs when you give back your property to the lender because you can’t afford to make monthly payments on a home mortgage. The mortgage lender is then free to sell the property to try and pay off the balance of your home loan.

There is  no guarantee that your mortgage lender is going to agree to a short sale or deed-in-lieu. But if you truly believe that you are going to default on a home loan that has already been modified, contact your mortgage lender to discuss your options.

College expenses can put a serious dent in your wallet. Although many students qualify for financial aid, parents may still be expected to contribute to tuition and housing costs. Does it make sense to buy a condo or house for a college student instead of having them live in a dorm? Here are 5 things to consider before beginning a house hunt.

1. Do you need a home loan to pay for the purchase? If so, are you really in a position financially to take on monthly mortgage payments? Use a mortgage payment calculator to figure out how much house you might be able to afford.
2. Expect mortgage lenders to scrutinize your credit history. Lenders want to know that if they underwrite a home mortgage, that you are able to pay it back. Mortgage lenders are going to want to see proof of income, assets, investments, and tax returns. Also expect to provide documentation that you have made mortgage payments on time for the house you live in.
3. Don’t expect Junior to pay the mortgage each month. Unless your college student has a steady income and expects to work full-time, it is unlikely that your child can make the mortgage payments. If your student is attending school full-time, that should be considered a job. Any money earned from a part-time job can be used for food and household expenses.
4. Are you able to afford utilities and maintenance costs? If you already own a home, you know that there always seems to be something that needs to be fixed or replaced. Also factor in the cost of routine maintenance such as mowing grass and snow plowing if your child won’t be doing the work.
5. Be honest with yourself–is your kid responsible enough to maintain a home? You don’t want to invest in a property only to have your college student trash the place. Also, consider your child’s maturity level. When you consider everything, you may decide that living in a dormitory is a better option.

Finally, have you checked out rentals near the college campus? Before shopping around for mortgage loans and visiting open houses, see what types of properties are available in the area. You may find an apartment, condo, or home for rent that is suitable for your student and much cheaper than applying for a mortgage to buy a property.

Applying for a mortgage loan can be an intimidating process if you aren’t sure what to do. That’s why it’s important to assemble a team of knowledgeable professionals to help you through the mortgage loan application process. The team you choose should include some of the following professionals.

Mortgage Lender

Before you even begin to hunt for  a home it’s important to choose a reputable mortgage lender who is willing to commit to loaning money to you. An experienced mortgage broker can help you shop for home loans from a variety of lenders.

You can also go directly to mortgage lenders to inquire about mortgage rates and terms. Choose a mortgage loan officer who can explain the different programs and takes time to assess you needs.

Real Estate Agent

A knowledgeable real estate agent can help you find listings in the area you want to buy a home. Agents should have information about recent purchasing activity in the area and access to the Multiple Listinig Service (MLS).

Avoid choosing an agent who haven’t sold any homes in the area you are interested in or who seems green about what’s involved with the home buying process. Another red flag is when a real estate agent won’t take your calls or spend much time helping you.

Real Estate Attorney

Find an attorney that specializes in real estate transactions before you get to the point of making an offer on a home. It’s important to have an attorney who can review your offer to purchase a home. An attorney will review all paperwork, prepare and register legal documents, and make sure you get a clean title to the property you buy. Your attorney is also going to be present when you close on the deal.

Home Inspector

Once you make an offer on a home you should make the deal contingent on having it inspected by a qualified professional. A home inspector goes through the property you want to buy and looks for areas that could be trouble, such as faulty wiring, bad plumbing, or a leaky roof. Most states require home inspectors to be licensed so only use one who has credentials that are up to date.

Getting a home loan to purchase a house is a huge investment of your time and money. Make sure you are getting the proper guidance from people who are qualified so you don’t run into problems later.

Educating yourself about how mortgage loans work should happen before you end up in negotiations to by a home. The following guide discusses some common mortgage terms you should understand as you work toward becoming a homeowner.

1. Amortization schedule shows how your monthly mortgage payment is split between principal and interest. Over time as the loan balance decreases, the amount of payment that goes toward the principal increases. Use a mortgage payment calculator to figure out an amortization schedule.
2. Appraisal is a report that puts a value on a property. The home value is determined by looking at the features of a home, as well as looking at sales of comparable properties in the same area.
3. Closing costs are fees associated with borrowing a mortgage loan. Some closing costs are nonrecurring fees, such the amount you pay for a title search. Other closing costs may be prepaid fees that recur over the life of the loan, such as property taxes and insurance premiums.
4. Down payment is the amount of cash you have to pay toward the purchase of a home. This money is due at closing and is not included in the home loan.
5. Escrow account is where money is set aside out of your monthly mortgage payments to cover property taxes and insurance. Most banks set up mortgage payments to include these fees, as well as principal and interest.
6. Fixed-rate mortgages have monthly payments that remain the same throughout the term of the loan. It’s common for these home loans to have terms of 15 or 30 years, but other terms may be available.
7. Home inspection is a thorough examination of a home to see if it structurally sound, in need of repair, or has other problems that need to be addressed. Always get a home inspection, even if you are purchasing new construction.
8. Mortgage insurance (MI) is a policy that covers the lender if you default on a home mortgage. MI is required when you have a down payment that is less than 20% of the purchase price.
9. Pre-approval occurs when a mortgage lender reviews your completed loan application and detailed financial information and has approved you for a loan of a certain amount.
10. Mortgage rate lock occurs when a mortgage lender agrees to guarantee the interest rate for a specific period of time. Most mortgage lenders require you to pay a fee to lock in the rate.

These are just few of the mortgage terms you may encounter. Review the glossary of terms to learn more about mortgage loans.

Many people dream of owning a home. They do whatever they can to scrape together a down payment on a mortgage loan and work many years to pay it off. But should you buy a home or continue to rent? Here are some things to consider.

1. Are you ready for the responsibility? Owning a home involves a variety of chores and financial investments. Are you ready to do yard work, home repairs, and other tasks that you currently don’t have to think about because you have a landlord? If you are not willing to do the work, or can’t afford to pay someone else to do it, you may not be ready for homeownership.
2. Do you have enough saved up for a down payment on a home loan? The larger the down payment, the smaller your monthly payments are going to be. Mortgage lenders also look more favorably on people who have a sizable down payment, healthy income, and low levels of debt.
3. Have you done your homework to understand the different types of mortgage products available? Just because your friend got a 15-year mortgage loan doesn’t mean that’s the right product for you. Knowledge is power and can keep you from getting into the wrong type of mortgage.
4. Do you need assistance from a first-time homebuyer program in your community? You may be able to get free advice from a housing counselor or help with a down payment.
5. Do you plan to use the first-time homebuyer tax credit? If so, you need to have a contract on a home before May 1, 2010, and must close on the home before July 1, 2010. If you qualify for the tax credit, you could receive up to $8,000.
6. Have you shopped around for mortgage quotes to get an idea of how much you can borrow? Compare offers from several mortgage lenders before choosing one to do business with.
7. Have you carefully researched the neighborhood you want to move to? Have a real estate agent do a comparative analysis of homes that are similar to what you want to purchase. Ask about foreclosure rates in the area and whether there is any data on how many homes are underwater on mortgages.

There are a lot of things to consider before taking the leap from renting to homeownership. Avoid feeling pressured to buy a home because everyone tells you that is the American dream. You may be content to continue renting a while. Consider all your options carefully so that you have no regrets in the future.

According to Freddie Mac data, mortgage rates averaged 4.95% for 30-year loans, and 4.32% for 15-year mortgages.

How Long Can Mortgage Rates Remain Low?

Current mortgage rates are near historical lows, but some housing experts believe rates may begin to rise this year. It is unclear what may happen to rates. However, you still have time to take advantage of low mortgage rates by refinancing, so keep the following things in mind as you shop for a loan:

1. You can’t time mortgage rates. Interest rates fluctuate all the time, so it’s difficult to predict with certainty which way they are headed at any given point in time. If you shop around for a refinance deal, consider asking your mortgage lender to lock in your rate. In most cases you must pay a fee to lock in a mortgage rate for a specific period of time, which is usually about 60 days
2. Don’t assume that your current mortgage lender has the best refinance deal. Shop around and compare deals for mortgage refinancing. The good faith estimate (GFE) can help you compare apples-to-apples. Let your current mortgage lender know about other offers to see if they can match them or give you a better deal
3. You could end up paying mortgage insurance (MI) if your property value has fallen significantly. If your home appraisal leaves you with less than 20% equity, expect to pay for MI. You can avoid MI by using any money you have saved to make a one-time payment at closing to boost your home equity
4. If you don’t have a title insurance policy to protect yourself, now is the time to get one. Title insurance is issued to protect your mortgage lender against problems that may be related to the property title. In many cases, you have to ask for an owner’s title insurance policy that protects you
5. Unless you are desperate to raise cash, it’s probably not a good idea to cash out equity when you refinance. With housing values still falling in many areas, you may want to hold on to as much equity as you can

Consider refinancing if you are struggling to make your monthly payments, have a high interest rate, or have an adjustable rate mortgage. However, refinancing your mortgage may not make sense if you plan to sell your home soon, or already have a low mortgage rate. Use a loan calculator to determine if refinancing can save you money.

The troubled economy has caused some homeowners to consider accelerating their mortgage loan payments. Although many financial experts caution against paying off a home loan early, many people are ignoring that advice and focusing on owning their homes faster.

Mortgage Interest

One of the most common reasons given to discourage people from paying off a mortgage early is because they won’t be able to deduct the interest they paid on their income tax returns.

Before you accept this argument hook, line, and sinker, use a mortgage payment calculator to see if the amount of interest you can deduct on a tax return beats what you can save on interest by aggressively attacking mortgage principal.

Saving and Investing

Another argument against paying off a home mortgage early involves the notion that you could earn more by investing the money you would put toward extra payments. In some cases you would earn more by investing the money. But it’s important to stay true to yourself and decide what type of risk you want to take with your cash.

Are you going to feel more secure with your money in the stock market or some other type of investment, or are you going to be happier knowing that you are going to own your home free and clear in a few years? Only you can decide if mortgage acceleration is right for your situation.

How to Accelerate Mortgage Loan Payments

If paying off a home mortgage early appeals to you, consider these popular methods:

• Make mortgage loan payments biweekly instead of monthly. This amounts to making 13 payments a year instead of only 12. Although many banks offer to set up biweekly payments for a fee, you can do it on your own. Simply cut your monthly home loan payment in half and pay that amount every two weeks.
• Use bonuses, tax refunds, and other windfalls to pay down your home loan. Make sure you direct the mortgage lender to apply the funds to your principal.
• Refinance mortgage to pay it off in 15 years. Depending upon how much principal you owe, expect to see the monthly payments increase. Make sure you have the income to support the higher mortgage payments.

Pay off Other Debt

Finally, when deciding whether or not to pay off a mortgage loan early, consider whether or not you have other debts. If you have high interest credit card debt or other loans, use extra cash to pay them off before turning your attention to acclerating mortgage payments.