It is much easier for someone who has actually gone through the process of either making their first purchase or have managed to arrange a home loan mortgage refinance; because they will at least have a reference back to the costs they incurred along the way. But if you are in the situation of being a first time buyer there are a few things you need to think about, because if you do not know about certain costs you may be forced into a position of borrowing more money than you intended to.

So what are the costs involved when taking out a home loan mortgage:

• Application fees
• Loan origination fee
• Home inspection and appraisal costs
• Points, these are paid on a once only basis usually to reduce ongoing interest costs
• Legal fees for the handling of the purchase (and sale if you are selling a previous home)
• Annual property taxes
• Repairs, remember when you own it you fix it
• House and contents insurance, contents you may be used to but now you will need to protect your house against damage or potentially complete loss, a house fire for example

Another factor you may want to consider is avoiding predatory loans, these are loans that are offered initially at a reduced interest rate and can appear very attractive to the buyer. Problems can occur later when the initial, what is called the honeymoon period, reduced payment period ends and the payments go up significantly. This can put a lot of people in financial difficulty as they may find that suddenly they can’t afford the new payment levels for their home loan mortgage.

A fixed rate home loan mortgage is an attractive option when rates are low because,although initial costs may be slightly higher, you will have a good idea exactly what you will be paying over the long term and should rates increase you will still retain the rate you agreed.

The bottom line is that you need to be aware of all the costs involved when settling a mortgage so that you can assess exactly how much you can afford to spend on the actual property and then you search for a property that is in that affordable price range. If you have to give up on one or two of the desired features you were looking for then so be it. Better to have a house that you can truly afford than one that is everything you want, but ultimately is going to end up going the foreclosure route.

If you are serious about avoiding foreclosure the worst thing you can do is ignore the letters and the problem. The more payments you miss the more difficult it will become to resolve the problem and loosing your house will become more likely.

So make sure you contact your home lone mortgage lender as soon as you become aware that you have a problem. There will be options available to you to help you through your financial difficulties and mortgage lenders really do not want your house, they would prefer that any financial problems are resolved. Some of the options are home loan mortgage refinancing and loan modification but there may also be alternative options.

Open and read all correspondence from your lender, apart from anything else the information provided may include suggestions for avoiding foreclosure. You are also likely to have any proposed legal actions against you outlined and you need to be aware of these, not opening your mail cannot be used in your defense or as an excuse if you end up in court.

Take the time to read and understand your loan documents so you know what your lenders procedures are if you do not meet your repayments. Also be aware that foreclosure laws and time frames are different in each state so find out what the rules are in your state, you can inquire at the State Government Housing Office.

If you need further help and advice you can contact a HUD approved housing counselor, this service is usually free and you can Find a Counselor near you using this link.

Part of the acceptance criteria for mortgage refinancing under the ‘make home affordable’ plan was that the new mortgage could not exceed the current value of your home by more than 5% (i.e. 105% ).  That has proved to be a number that was not a workable level and so the criteria has been extended to 125% recently so that more people qualify.

Although this is a more practicable acceptance criteria in the spirit of the program, the level is getting a little scary in terms of the loan to value ratio and is starting to smack of what got us all in this mess in the first place. At the end of the day the intention is that the repayments need to be sustainable and the loan ultimately needs to be paid off.

For that reason I suspect that this will be the only increase that will be done so if you still don’t qualify I wouldn’t hold my breath, you may have to wait until house prices rise again to see yourself in line for the program and right now who knows when that will be for sure.