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According to a March 2007 report by RealtyTrac:
- Ohio had over 8,000 foreclosure filings in February 2007.
- Ohio had a 74.23% increase in foreclosures since March 2006.
- Ohio has 1 foreclosure for every 582 heads of household.
 Foreclosure is the legal means by which a lender can take a property due to default on the mortgage payments. Real estate tax collectors can also foreclose on a property for nonpayment of taxes. The foreclosure process can take 18 months or longer, but in the end, the owner is forced to move out and the property is sold to pay the remainder of the debt. If the property is worth less than the amount owed, the owner may be forced to pay the difference. Any foreclosure damages your credit and makes it harder and more costly to borrow money later. Even your ability to rent an apartment may be compromised, since landlords frequently check the credit reports of prospective tenants. As a result, the foreclosure victim may even become homeless.
Many factors contribute to foreclosure. A random sample of records in Chicago showed the most common factors are job loss or a health crisis. Other factors can include a death in the family, disability, overspending, and other costs or debts including those stemming from separation or divorce.
Creative financing may lead homeowners down the path to foreclosure, causing them to buy more house than they can truly afford. These enticing products now are all around us. Adjustable rate mortgages, interest-only loans, “3-1 buydowns” and “228 products” can be risky, especially if the borrower does not fully understand the terms of the agreement. With an adjustable rate mortgage, the homeowner may find that the mortgage payment quickly becomes unaffordable when interest rates begin to rise. Interest-only loans mean that the homeowner can pay for years and never get any closer to “owning” the home. In a 3-1 buydown, the developer of a new home includes the first few years of mortgage interest in the purchase price of the home. That inflates the purchase price and the commissions paid. It also can hold down the monthly payments at artificially low levels for a while, before they “balloon” beyond what the owner can afford to pay. The 228 product features interest-only terms for two years, followed by 28 years of full payments (principal and interest). When the increase kicks in, family budgets may be stretched to the breaking point.
What all these products have in common is that they make it easier for you to buy a home; especially a bigger home, which many would say is a good thing. Yet buying a home in this way may leave you vulnerable if the financing arrangements do not place you on a stable financial course into the future. The most important thing, always, as a potential buyer is to think for yourself.
If you are in the market to purchase a home, getting a pre-qualification through a bank or mortgage company will help determine how much house you really can afford. People considering a home purchase must educate themselves. After all, owning a home is one of the largest investments and biggest responsibilities most of us will take on in our lifetimes. In addition to being able to afford the monthly mortgage payment, one must be able to afford the property taxes, insurance, utilities and maintenance costs that are necessary to keep up the property. Buyers should be especially careful to understand and budget for real estate taxes. Taxes will jump considerably once a brand new home is fully constructed and you move in. Don't be talked into buying more home than you are sure you will be able to afford.
Consider a Homebuyer's Education program. These programs give you a more complete understanding of the mortgage programs available plus the expectations and responsibilities of owning a home and they are free of charge. These classes are excellent even if you already own a home. They assist with:
- Budgeting and money management
- Down payment assistance programs
- Home maintenance and repair
- Understanding real estate taxes and insurance
- Post-purchase and foreclosure prevention
There are 80 HUD-approved housing counselors in Ohio . To find a HUD agency in your area contact HUD at 1-800-569-4287. Or visit the website at: www.hud.gov. These agencies will advise you on budgeting and debt management.
To find a homebuyer education program in your area, visit the FannieMae website, “Counselors & Agencies” section at: www.mortgagecontent.net
For more information, please see our website www.ohiotreasurer.gov or call us at 1-800-228-1102.
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