Tampa Student Loan and Bankruptcy Attorney Blog — March 29, 2023
Home sellers and home buyers are likely both waiting for some kind of change in the financing markets right now.
Those homeowners locked in with low rates do not wish to sell, but cannot maintain a standard of living with their current income and increased expenses. They may not qualify for an equity loan due to tighter credit conditions in the marketplace. So they believe they are stuck and face mounting credit card debt.
Same with home buyers essentially, although for different reasons. Mortgage rates above 6%, limited home inventory on the market, and now a limit to the marketability of mortgage bonds will place even more pressure on mortgage rates even if the Fed pauses the interest rates per the Wall Street Journal in its article today “How the Bank Mess Can Hit Home Buyers“. This will limit home sales for those who are not cash buyers.
It’s a quandary that’s for sure. Fortunately, in Florida, for homeowners, home values remain higher and have increased approximately 10 – 22% year over year. While in California, values are dropping. More than a third of the 15 U.S. metro areas with the biggest jumps in median home prices are in Florida according to CNBC. Not necessarily Orlando, but in the smaller cities on both Florida coasts as well as the Lakeland-Winter Haven area.
We may have some solutions for those who cannot pay the bills but own a home. People who cannot qualify or afford a home equity loan. In order to obtain a HELOC, lenders usually want you to have a credit score of at least 620, a debt-to-income ratio below 40% and equity of at least 15% per Nerd Wallet. You run the risk of losing the home if you cannot make the payments however.
Some folks may be older and simply want to continue living in their home while they age in place. Perhaps they cannot get a reverse mortgage or don’t like what they hear about reverse mortgage traps. The Consumer Financial Protection Bureau has cited many reverse mortgage groups for allegedly misleading people with inflated and deceptive home estimates to lure consumers into taking out reverse mortgages. The fees are particularly high and eat away at home equity. The typical cash flow challenges faced by retirees who own their own home is addressed in detail by the National Council on Aging here. A key finding was the over one-third of older homeowners face a gap between their fixed expenses (basic necessities and any housing debt) and their sources of income. This 2021 study came out before the inflationary pressures of the last two years, so it’s likely increased to one-half of older homeowners now in early 2023. These inflationary pressures along with a fixed income will stress any age in place plan.
A Lady Bird deed for older homeowners, a land deed trust sale, a mortgage modification or even a Chapter 13 bankruptcy with a plan to eliminate debt or re-structure a mortgage for a lower payment are possible options. Realtors often don’t know much about these options, so an experienced attorney should be consulted.
Perhaps a short sale with a deficiency waiver if you are underwater: these are some of the possible solutions out there. Even if you don’t have equity in a home after closing costs, but have a low mortgage rate, there may be a solution to maximize the value in a sale that is out of ordinary and not a straight MLS sale.
Bottom line, if you are having problems paying your bills, but own a home, please reach out to us to discuss some of these options and see if anything pops out as a potential solution.