Over-Financing the American Dream

Are you dreading a mortgage payment that will drain your household budget? Are you worried sick every time you go to fill up your tank with gas or buy groceries? With ARMs resetting and gas and grocery prices on the rise, you may be under the impression that foreclosure or bankruptcy are the only viable options to your financial woes.

That is not the case. Your best option is to confront the impending financial burden, as soon as you can. Credit counselors report that those homeowners who take charge of their financial situation are more likely to avoid money nightmares.

If the interest rate on your ARM is due to reset in the coming months, you can start taking corrective action today. ClearPoint Credit Counseling Solutions offers these tips to help you alleviate the impending burden of a higher interest rate.

• Prioritize your debt. If you are experiencing debt management issues, regain control over your finances. Put away your credit cards and focus on paying down your existing debt. Start with your high-interest credit cards. Pay down those cards first, and then apply that freed-up money to quickly pay off your low-interest cards. That way, you will have extra funds available to meet a higher monthly mortgage payment.
• Reduce household expenses. Household expenses are a source of money that can help pay for increased mortgage payments. Look at every non-essential household expense and determine which can be reduced or eliminated. Do you really need premium cable channels or frequent restaurant outings? Are all of your various phone services absolutely necessary? Should you sell that extra car? Can you save on gas money by carpooling or taking the bus? Making small cut-backs in several areas can free up a significant amount of money each month.
• Refinancing. Refinancing might present a good option, depending on your property value, the amount of home equity you have, the costs to refinance, how long you plan to remain in your home, and whether you can qualify for a more favorable interest rate.
• Check your credit report. Before you decide to refinance, it's important that you examine your credit report. Credit reports are among the criteria lenders review when determining interest rates for a mortgage loan. The higher your credit score, the more flexibility you will have when selecting a loan. You'll also be granted a more favorable interest rate. Generally, a credit score of 750 or higher is most desirable.
  
  For a copy of your credit report, visit www.annualcreditreport.com. You can obtain a free credit report from each of the three major credit bureaus on an annual basis. If you are concerned that your credit report isn't very strong or contains inaccurate information, contact ClearPoint Credit Counseling Solutions. Request a credit report counseling session. A certified financial specialist can analyze your credit report and provide strategies to build the integrity of your credit report or help increase your score.
• Review current loan documents. Before deciding to shop for a new mortgage, carefully review your current loan documents. Make note of your interest rate and what it's tied to; your outstanding loan balance; and the current status of your property tax and insurance payments. Is there a prepayment penalty?
• Shop Around. The terms of mortgage loans vary from lender to lender, so it's critical to shop around. Take care to choose a reputable lender. You'll want to compare application fees; appraisal fees; loan origination fees; discount points; legal services and other miscellaneous fees. Don't forget to ask your bank or current mortgage lender if they offer a low-cost or no-cost refinance option. Ask specific questions, and find out whether or not you can move from an adjustable-rate loan to a fixed rate.
• Consult a Professional. Deciding whether to refinance can be a difficult process. If you find yourself overwhelmed, seek the help of a professional credit counselor at a non-profit organization. Credible consumer counseling agencies, such as ClearPoint Credit Counseling Solutions, can assist you with money management, housing matters and other factors impacting your financial situation. For more information on ClearPoint's Housing Counseling Solutions services, call 877-422-9041.