subject: 5 Financial Questions To Ask Before Your Make A Decision About Your Underwater Mortgage [print this page] If you have an underwater mortgage, it's easy to feel overwhelmed. There's a lot to think about before you make a decision about how to proceed, particularly since how you choose to deal with your underwater mortgage can have significant consequences in other areas of your life, including your finances. That's why we've compiled the following list of five financial questions that you should ask as you evaluate your underwater mortgage options.
1. Are you self-employed? If you're looking at a home loan modification or short sale, it's important that you list your self-employment income correctly. That means including self-employment taxes in your list of expenses. If you don't do this, your income will appear to be much higher than it actually is, which could mean that you won't be approved for a loan mod or short sale.
2. Have you accounted for all of your expenses? Even if you're not self-employed, you should still make sure that you've listed all of your expenses on your income sheet. That's because it will be harder to get your short sale or loan modification approved if your income is higher than your expenses. Make sure you dont leave anything out when compiling your list of expenses; include clothing, food, transportation costs, etc.
3. Is there anything you can do to "increase" expenses? If you've listed all your expenses and your income still seems to be too high, there may be ways to "increase" expenses and "lower" your income. For example, you could increase the money you set aside in an employer-sponsored retirement account, like a 401(k) or 403(b). Or you could increase your tax withholdings. This will make your income appear lower to your lender, which could make it more likely you'll be able to go through with the short sale or get a home loan modification.
4. Are you getting the best possible deal on your insurance? If you're considering short sale or foreclosure, now is the time to review your insurance policies and, if necessary, obtain different coverage. That's because once you stop making mortgage payments, your credit score will drop. And a lower credit score means a higher premium. By locking in the best possible rates now, you'll save yourself some money.
5. Do you have additional accounts with your mortgage lender? If your mortgage is at the same bank where you do you have a checking or savings account, it's probably a good idea to open up accounts at another institution. That's because, if you stop making mortgage payments, your lender can go in and raid your other accounts to get your mortgage payments, in a process called a "sweep." But if your checking and savings accounts are with another bank, your mortgage lender won't be able to get their hands on that cash.
Of course, these five questions aren't the only ones that you need to ask when you're analyzing your different underwater mortgage options. That's why Homeowner 101 created the Underwater Homeowners Assessment and Action Plan . We'll walk you through these and other questions you need to ask so that you can make the decision that's right for you.
Homeowner 101 is an organization designed to give underwater homeowners Answers, Information, and Resources (A.I.R.). We offer the Underwater Homeowners Assessment and Action Plan, a resource for every homeowner who owes more than her house is worth whether youre having trouble making your mortgage payment or not.
by: Molly Castelazo
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