Is Your Mortgage Approval At Risk?

By
Real Estate Agent with Davis R. Chant, REALTORS RS301772

I was reading a message board the other day. The person posting was lamenting the fact that he just lost his job. Since he had no idea that he was about to be fired, he rented a new apartment and also racked up some credit card charges.

At the time, it certainly didn't seem to be a problem; he had the income to cover his expenses and payments.

Then came the pink slip. Ouch!

He did succeed in getting another job, but his rent and credit card expenses exceed his income. He managed tocredit cards relocate to a cheaper apartment but making the credit card payment left him with very little money for everything else.

It seems that many people, from Wayne County PA to Seattle Washington and everywhere in between, can claim this story as their own.

He will likely end up falling behind on his payments - and it should also be noted that if he had a low introductory interest rate, when the introduction period expires, his interest rate could go to 19% or higher (I have heard that some are paying as much as 32%?). The nasty thing here is that with the interest rate going higher, so will his monthly payment. So the fellow who can barely scrape together enough for his payment now may end up with a new payment that is double or more what the original one was.

This creates an even uglier situation, because as he falls behind and becomes "delinquent", his credit score will eventually take the hit and drop as well...which will certainly make getting a mortgage difficult when he's ready to purchase a home.

There is a ray of hope if you find yourself in this man's situation: talk to your credit card company. Just call them and tell them what is going on - maybe they can set you up with a new payment plan. It may require closing the account, but your credit score will be protected, and you may get a much lower interest rate and a lower monthly payment.

sharks credit cardsHOWEVER: beware of the sharks circling in the water, masquerading as "Credit Repair Companies" who promise to eliminate your debt and improve your score, and tuck you in at night to boot...you might do well to visit the U.S. Trustee Program / Department of Justice Debtor Education web page and do some research.

The man I wrote about above had a relatively simple fix, as he only had one credit card, and resolving the issue with the card was relatively easy. In situations involving multiple cards, it may require some more work.

If you find yourself in a "financial situation", please, contact your credit card company or an approved credit counseling agency and ask them to help you. Not only will it help your immediate situation, but your future home buying and other real estate goals as well.

 

Copyright ©2007 by Karen E. Rice. All Rights Reserved. Shark photo courtesy of Cerolene / Flickr Creative Commons licnese.

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Karen E. Rice is a real estate agent working in Pike & Wayne County of Northeastern PA in the Pocono Mountains. Lake Wallenpaupack is one of Pennsylvania's most popular destinations for vacations, retirement, and purchasing a home.
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Karen Rice (that's me!) lists & sells in Tanglwood, Wallenpaupack Lake Estates, Hideout, Indian Rocks, Masthope, Fawn Lake, Tink Wig, Woodland Hills, Walker Lake, Hemlock Farms, & more in Pike & Wayne County.

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Rainer
29,070
Martinelli Caputi
Martinelli Caputi & Associates, Ltd. - Warwick, RI
& Associates, Ltd.
Great post Karen!  There are so many sharks out there!  It really is unfortunate.  The last thing these folks need is someone to drag them down further.  I wholeheartedly agree... people need to do the research before they hire any of the "credit repair services." 
Nov 05, 2007 02:06 AM #1
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Jason Sardi
Auto & Home & Life Insurance throughout North Carolina - Charlotte, NC
Your Agent for Life
Important post for consumers Karen.  Communication is key in trialing financial times.  I've only ever dealt with one reputable credit repair company that has not one complaint by the Better Business Bureau.  People need to do their homework.
Nov 05, 2007 02:54 AM #2
Rainer
31,469
Keith Stoller
Keith Stoller Tax & Business Solutions - Bakersfield, CA
Those credit card payments, when one defaults, can go as high as 35 percent and then some.  My question would be what happened to the usury laws?  When the government reduced rates to entice people to spend more and help the economy it seems the public did just that.  Now that the fruit is being reaped from that the consumer gets no backup.  I think the government sold the American consumer short and we, unfortunately, took the bait.  With the restricted bankruptcy laws it seems that there needs to be a little counter-balance for the consumer to limit these egregious default rates.
Nov 05, 2007 04:27 AM #3
Rainmaker
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Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

Richard - thank you for commenting.  What troubles me about these companies is that they prey on desperate people who think they are getting helped.  And it's not even a matter of the consumer being "stupid."  These people are SLICK in their presentations and online presence.  This isn't like some Nigerian Scam Email...ya know?

 

Nov 05, 2007 04:53 AM #4
Rainmaker
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Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales
Jason - thanks for visiting and commenting.  I think a lot of people are afraid to tell their credit card company that they're in trouble.  What they do not realize is the company doesn't want you to go in default any more than you do, and they don't want to spend the money sending bill collectors after if they don't have to.  
Nov 05, 2007 04:54 AM #5
Rainmaker
543,550
Karen Rice
Davis R. Chant, REALTORS - Hawley, PA
Northeast PA & Lake Wallenpaupack Home Sales

Keith - I had the same question when I heard the 32% interest:  ISN'T THERE A LAW AGAINST THIS?  Good heavens, it almost makes Don Corleone seem like Santa Clause!  I don't know if I'm quite ready yet though to blame the government so much for people's irresponsible money habits (not that all of the people in trouble got there through being irresponsible!).  Just because you CAN do something (like get a credit card with a $10,000 line of credit and then max it out and open ANOTHER one cause you're qualified) doesn't mean you SHOULD!

More than anything, I blame it on the "fast food mentality" that Americans have come to live and embrace.  Nobody (including me) wants to WAIT for anything...WHY WAIT when we can have it NOW and future bills be darned... 

Thanks so much for stopping by and commenting! 

Nov 05, 2007 04:58 AM #6
Rainmaker
100,900
Lisa Ryan
Callaway Henderson Sotheby's International Realty - Montgomery, NJ
Selling Princeton,West Windsor and Montgomery Town
There's plenty of blame to go around.  What the heck are the banks thinking when they jack the rates up sky high after one default?  Greedy, greedy.  I just read in the paper the other day about a new law that will prevent banks from raising interest rates on all your cards if you are late on just one card.  Another grredy idea about to be shot down.
Nov 05, 2007 04:16 PM #7
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Katerina Gasset
Get It Done For Me Virtual Services - Wellington, FL
Get It Done For Me Virtual Services
Karen- Another great consumer post, this is one of the best posts you have written! And the topic is so timely. Instant gratification is a disease in this country. Katerina
Nov 05, 2007 05:00 PM #8
Rainer
18,951
Universal Funding Partners
Universal Funding Partners - Scranton, PA

Karen - great post with very important information. 

It truly is a shame that there are so many scam companies out there.  The only bigger shame is that the general public is drastically undereducated to protect themselves from these scams. 

I try to play "hero" to my clients by being the one person that takes the time to educate them about credit.  If you search online you'll find plenty of free resources and forums that show you step-by-step what you can do to fix your own credit legally.  I share these with my clients to empower them to make the change themselves.  I also have letter templates I use to make disputes just to make it a little easier for them.

Personally, I feel that the biggest problem today is that we are all uneducated about budgeting, managing credit, and financing.  All the problems we have today in real estate could be lessened if the consumer knew more about what they were getting into.  I firmly believe that the three subjects above should be required study for high school graduation.

Nov 25, 2007 01:35 AM #9
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