Lisa Simpson
Jan 25,2010
In: Foreclosure Crisis

Many Questions for the Common American are Cropping up in this Crisis Period

There are many queries about crisis period.

There are many queries the general people are asking while living through the worst financial crisis in recent decades. They are facing these in their daily lives.

One query is about what happens following foreclosure? Thousands are either in foreclosure or in the pre-foreclosure stage where 90 days have passed since they have paid their mortgage dues. Millions have already forfeited their houses.

Foreclosures tell badly on the credit score. It might be as high as 150 points or even more – once the foreclosure has been posted. It could be worse depending upon length of the payment lapse.

After the damage has been done to the credit score one needs to rebuild it again by making judicious use of available credit. Credit cards have to be used sparingly. It means one should chalk out a budget and resolve to stick to it. If this is followed without fail, then life will once more become normal. One has to cut down on some extras and life will begin to flow easily again.

If one has either a foreclosure, short sale or bankruptcy tagged on to credit history then it might take 3 years or even 5 years to be able to purchase another house by making use of loans advance by Fannie Mae or Freddie Mac. FHA with their insurance cover of loans could also be of help.

Another common query is about purchasing condos for purposes of investment. One person wanted to buy a condo hotel property but was told by the lender that this could not be bought as second residence and thus a long term loan with fixed rate could not be availed of; it meant missing out on current low interest rates. The only loans available were the exotic ARMs. The interest is 6.5% and 25% to about 30% cash down payment has to be made.

It is best to avoid buying this type of property that was popular during the heady booming days of the housing sector. The previous arrangements with running hotels are not working out anymore. Everywhere occupancy of hotels is dramatically down. There is slim chance of reselling the property in the next couple of years considering the economic climate. It would be cheaper to rent a hotel room and keep it booked rather than buy an unwieldy property that is akin to a white elephant. There are repairs, upgrades, staff and you name it to be attended to.