Last weeks headlines read, Colorado foreclosures are up by 30% over last year’s figures. Why is this so?
It’s all about “easy money”. Mortgage loans have been getting easier and easier to get. Homebuyers can buy home with little or even no money down. This easy money climate is a formula for disaster, if the borrower doesn’t consider all the consequences.
What happens when the home owner gets transferred or has a change in income? If the home must be sold, there may not be enough equity available to cover the closing costs. In this case, the borrower must pay out of his own pocket to sell the home…or risk losing the home to foreclosure.
Many “easy money” loans come with prepayment penalties. These penalties tie the borrower to the initial mortgage loan company for a period of time. If the borrower decides to pay off the loan early, this fee is owed to the mortgage company. These fees are significant and cannot be negotiated away or ignored.
This risk lessens over time. Appreciation generally adds to the value of a home, but if life’s changes occur too soon, the borrower must act responsibly and pay the mortgage company what is due.
As with most good things in life, there is a price to pay. Chances are if a home is purchased with no money down, going out there will be a price to pay. A wise buyer is one that can assess the entire picture and plan a strategy that includes a successful exit.
About the Author
Kristal Kraft
Kristal has been helping buyers and sellers in Colorado since 1984. She enjoys sharing her knowledge of the Metro Denver Real Estate market via blogging and in person while driving around the beautiful Rocky Mountain town of Denver! For fun, Kristal enjoys shooting things with a Canon. Visit Denver Photo Blog
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