I’ve got a Bad Credit Mortgage Loan – What Should I Do?

A lot of us discover ourselves trapped in bad mortgages, our houses are worth less than when we purchased them so we are “underwater” and the bad credit home loan payments are simply too high. Continuing to pay for sky high rates on an ever diminishing asset have left many people trembling their heads and resulted in many people walking away from their own houses, once the cornerstone of the American dream.

For a lot of people a home mortgage refinance plan will simply not work, it will only delay the unavoidable. The homeowners who are in the most trouble are investors and those who bought well beyond their means. Buying a million dollar home over a 50,000 salary won’t work over the long term. Unfortunately several loan providers and several debtors did not take the time to educate themselves with regards to the financial reality of interest only loans or 3 or 5 year adjustable rate mortgages (ARMS).

These varieties of loans are extremely risky and really designed for individuals who can not afford to pay for what they are purchasing. An interest only loan is exactly what it seems like, a loan where you pay only the interest on the money lent. This loan only makes sense for flippers and speculators who anticipate getting a property and being out of it very quickly. You are not paying your expenses on the property; you’re just paying to hold onto it until you can sell it off. 3/5 year ARMS only make sense for workers which are moved for short periods of time to other offices or people who don’t plan to be in their houses for long. They are generally affordable loans with lower payment per month but the rates are subject to change.

The traditional purchaser should be buying a home having a 15 or 30 year fixed mortgage. Sadly, too many people became enamored with these more exotic loans and their less expensive rates and bought more house than they could possibly afford. Despite the many state and federal programs accessible for bad mortgage debt settlement most of these individuals will have little alternative but foreclosures or short sale, whether now or in the future.

For individuals who can afford their houses and can make monthly obligations on a fixed interest loan on the home they currently live in, banks may be willing to work with you to modify the terms of your bad credit mortgage loan. Those individuals who have their loans through local banks or lending institution will find themselves in a better position to modify their loans.

For many people in homes that they cannot afford with mortgages which are draining their assets the best remedy might be to walk away. Rather than deplete every thing you’ve got to hold onto this home, you might be better off turning over the keys to the bank and renting a house. Understand that if you do decide to follow this path, your credit will likely be damaged for seven years and in some states banks can and will go after you personally for the difference between your financial debt and what they’re capable of getting for the house.

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