In my role of helping people with short sales and as the developer of the mortgage relief formula home study course, I talk to people who owe more than their house is worth and can’t afford the mortgage payment. A lot of the houses that people discuss with me are in the $200K range but many are upwards of one million dollars. I have clients with $1 million or $1.5 million homes who are in the tough position of figuring out what they should do.

For example, if the buyer pays $180,000 because that is all you can get as far as an offer, and your mortgage is for $250,000, you have to pay in $70,000 cash at closing or else the deal will fall through. Do you have that kind of cash? Many people do not have that money. And I don’t suggest you raid your 401(k) either. So the only other option that is the least bit appealing is a mortgage short sale. A short sale involves mortgage lender cooperation. Your mortgage company must agree to accept the buyer’s full proceeds as payment in full for your mortgage. The home loan lender lets you out of your mortgage and allows the new buyer to step in and buy your house. You are out of the picture and you didn’t put any cash in.

The problems with those folks is that often they have a second mortgage and they have assets. As I have explained, folks with high end homes and some assets to protect have special issues. If you have assets then the lenders may pursue judicial foreclosure even in states such as California that generally follow the deed-of-trust non-judicial foreclosure route. In judicial foreclosure, lenders can get a judgment that they can execute against your other assets. Although trustee sales are most common, more and more we will see lenders going to court against borrowers, even years later.

Second mortgages present a particular problem for the higher priced homeowner. Many times the short sale proceeds will be insufficient to pay your first mortgage off, let alone the second. The second mortgage lender may accept partial payment as a short sale but they may refuse to release you from the possibility that they will pursue your assets in the future. The statute of limitations for this sort of thing can be as long as four or five years, depending upon your state.

Third, begin to live within your means. If that means renting a smaller place, then so be it. What you cannot do is what so many Americans are doing. You cannot live beyond your means and expect someone else to take care of you. That is your job. Am I advocating that you simply walk away from your house or your credit cards? No. I developed the Mortgage Relief Formula which is a home study course, a step by step guide to getting out from under. Out from under a house that you cannot afford. Out from under a crippling mortgage. Out from under crushing credit card debts. And I think you can do all this and actually improve your credit score. That’s right, your FICO score can go up. So if you think you have no options, that you are locked in to this debt slavery let me assure you that you are not. I got out from under years ago, in the last California real estate crash. I thought I was trapped but I found out I wasn’t. I did a short sale, rented for awhile and then used the same bad sellers’ market to my advantage and bought a gorgeous house for next to nothing down. I didn’t go to the bank for a loan, either. The sellers let me pay the payments on their existing loan.

Learn more about Obama Mortgage Relief Plan Qualifications.

Trying to get loan modification help but finding it difficult to understand your banks guidelines and approval process? Homeowners who are in the middle of applying for a loan workout, or who are wondering if they might qualify for a loan modification need to know a few important tips that will make the process easier to understand and give them the inside edge for quicker approval and mortgage relief formula. Once you understand a few basic guidelines, you will be able to complete your paperwork so that it has a greater chance of approval and be on your way to a fresh start with your lender.

Here are 6 helpful tips that will work with any lender to help your loan modification application get approved: You must know your lenders guidelines for loan modification approval. Each lender has a formula that they use to arrive at an acceptable modified payment and your application must demonstrate that you can meet this criteria. The federal stimulus plan, called Home Affordable Modification, has standard guidelines for everyone-learn what these are and you are on your way to success.
Learn how to calculate your debt ratio so that you can figure out a monthly budget that implements your new modified payment and falls within your banks guidelines. For example, if your lenders guideline is a new payment that equals 31% of your gross monthly income, then prepare your loan modification application so that the new payment equals 31% of your gross income to meet the banks qualifications.

An example in big money saving- This method will work with any mortgage, but for our purposes, we’ll use these fictitious numbers. We have a mortgage of $225,000. The interest rate is 7.25%, and the length of the mortgage is 30 years. When we enter these numbers into our amortization calculator, we find the monthly payment to be $1,534.90. When we look at the first payment on our spreadsheet, we see that out of this $1,534.90, $175.53 goes toward principal and $1,359.30 to interest. When we look at the second payment we see, $176.59 will go toward principal and $1,358.31 will go toward interest. If we pay the second payment’s principal part, $176.59 upfront, or at the same time as the first payment, we will save the $1,358.31 in interest. Why do we save all this money? Because after we make our first payment, we will have a balance remaining on the mortgage of $224,824.48. The difference between how much interest we pay for borrowing this amount of money for 359 months and 358 months is $1,358.31.

There’s a special module for the homeowners who are unemployed. Further, a specialized contingency plan under the modification program has been devised for the homeowners who are not able to pay the mortgage payments on time. This module also prevents the home from foreclosure. Remember, Obama’s loan modification program has been designed to give benefits to the homeowners.

Here, you’ll see that principal part of the payment is $515.93. If we add this amount onto each of our payments from the first payment of our mortgage to the 180th payment of our mortgage, the mortgage would be paid in full in 180 payments, or 15 years. $515.93 may seem like a lot to pay upfront, but even if you were to take the principal part of payment number 55, $243.00, and add it on to each payment, you would have your mortgage paid more than 10 years sooner. Summing it up, you can use this as an approximate formula: On a 30 year mortgage, add to each payment, the amount equal to the principal part of payment number 180 and you will have the mortgage paid in 15 years. Or, add to each payment, the amount equal to the principal part of payment number 55 and you will have the mortgage paid in 20 years. While this formula doesn’t work perfectly for interest rates over 10%, for interest rates around 7%, it is fairly accurate. Now, let’s see how to turn that savings into wealth.

Learn more about Obama Mortgage Relief Plan Qualifications.

I hear from people who are very very frustrated and they will often say that they are simply going to walk away and let their house go to foreclosure sale. This is not the best course. I am always urging people to deal with foreclosure situations so that they don’t go through to the foreclosure sale. The reason for this is that in many cases your lenders can pursue you after the sale and make life difficult for a long time.

There are several scenarios where this can happen. First, if you have two mortgages. The first mortgage relief formula may be doing the foreclosure. Once the house goes to auction, the second mortgage gets wiped out. But the law is generally that the second mortgage holder can still sue you for breach of contract. They will probably win a quick summary judgment. And now you have a judgment against you that can drag you into bankruptcy.

And when you own, you are losing equity as prices fall. Plus, as a renter, you have a plentiful supply of houses to rent because a lot of folks can’t sell so they are renting, assuring the rental market of decent rental prices. None of this is relevant if you can’t afford what you are paying. The big issue today with mortgage foreclosures is people cannot afford their house payment. Their mortgage is too big. The mistake they make is running through their savings.

Contrary to the commercials you see and hear, this is not an automatic occurrence. Instead, there is a particular formula you can use. To figure out if you are going to have to pay income taxes from a short sale, you need to focus on the tax basis and the amount you owe at the short sale. The tax basis is simply your purchase price plus any capital expenses such as home improvements. Assume you buy a home for $500,000 and put $100,000 into it in improvements. Assume you refinance a few times and owe $500,000. Your tax basis is $600,000, which is more than you owe. In such a scenario, you will not have to pay income tax on the short sale relief. For most people, however, this is not the case.

In any situation where someone has a judgment against you they can haul you into a hearing and require you to bring financial documents, lists of your jewelry and bank accounts and valuables, and just about anything else they care to ask of you. And you have to go and answer their questions. It’s a mess. The best way to avoid this is to not just walk away. Do a short sale. Negotiate with the lenders. Get help if you need it. But don’t ignore this situation and let it just go…because more and more, it will come back to bite you.

Learn more about Obama Mortgage Relief Plan Qualifications.