With so many people walking away from their mortgages in recent years, it raises the question: Is walking away from your mortgage the moral thing to do? In many cases, the bank is willing to forgive the remainder of the loan for people who simply cannot afford to make their payments any longer and decide to leave their home behind. But what about those who don’t have that option and the bank isn’t being as understanding and forgiving?

Many people who refuse to walk away from their mortgage despite owing double or even triple what their home is currently worth have made that decision because of their morals. Many of these homeowners look to the Bible as the guideline for their decisions and there are verses that would prohibit, or at least discourage the act of walking away from a financial obligation such as a mortgage regardless of the circumstances.

In Proverbs 37:21 (Old Testament), the Bible says this: “An evil person borrows and never pays back.” These are harsh words especially for mortgage borrowers who are considering or have already done a “strategic default.” A strategic default is when a homeowner decides to simply stop paying their mortgage even though they have the financial means to do so. They simply stop paying because the home is worth less than what they owe on it. Many people would say this is immoral because the homeowner made an agreement to pay and they simply stopped paying.

In addition to walking away from their financial obligations, there are other ramifications. For instance, walking away from your mortgage eventually leads to the house going through foreclosure. With each foreclosed home in a neighborhood, the property values of the surrounding homes also come down. This means that walking away not only impacts the bank that owns the home, but it affects your neighbors and their finances, too.

On the other hand, what about people who simply cannot afford to pay their mortgage any longer and they decide to walk away? The answer to this question is a little tougher. Many of these homeowners entered into contracts several years ago but have since suffered hardship due to medical reasons, job loss or an increase in mortgage payments due to their rates adjusting. If these people simply do not have the means to make their mortgage payments, are they being immoral as well by walking away?

For many homeowners who decide to walk away from their mortgage, it is not a moral issue but rather a financial issue. Since businesses are allowed to declare bankruptcy and back out on their financial obligations, some individuals feel that they should be able to rightfully do the same thing. While it may make good financial sense for a homeowner, is it the moral thing to do?

There are many options to consider before simply walking away from your mortgage. From refinancing to loan modifications and forbearances, it is important to try all of your options before you simply mail your keys back to your lender. If every other option has been considered and tried, do you still think it is immoral to walk away?

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Searching for your first home is an exciting experience. With all of the options out there today, you can often find the home of your dreams at a price you can afford. But there are many things to consider when buying your first home. Here are four tips to help you choose the home that will provide years of good memories for you and your family.

1. Work with a qualified real estate agent. Buying a home is a complicated process. Many first-time home buyers look at a real estate agent as just another unnecessary cost when buying a home. But the expertise and knowledge that a realtor can offer to you as a home buyer is priceless. The money they save you undoubtedly makes up for their commission. A realtor will make the entire process faster, smoother and more enjoyable for you.

2. Know what you can afford. When shopping for a home, one of your most important considerations is going to be your mortgage payments each month. There is a difference between knowing that you can afford the monthly payments and knowing if you can afford the home. Monthly payments are just part of the equation that you have to consider. When combining your mortgage payments, homeowner’s insurance and property taxes, you should not be paying out more than 30 percent of your gross monthly income. Also, remember to set aside enough to pay for the closing costs, which can cost between 3 and 5 percent of the total value of the home.

3. Apply for down payment assistance. Are you having problems trying to save for a down payment on the house you want to buy? There are many programs designed to help buyers just like you. HUD, for instance, offers grants to many low and moderate income families who are trying to buy a home. In some cases, they even offer loans that amount to 3 to 5 percent of the price of the home to assist with the down payment. If you stay in the home for a certain number of years, HUD often forgives the loan depending on certain circumstances.

4. Know what you are looking for. When you start the home buying process, you should have a list of criteria that you are looking for. Do you plan to start a family? If so, make sure the homes you are looking at have the proper number of bedrooms and bathrooms to accommodate your growing family. Is it important to find a home close to your job? Or are you looking for a home near quality schools and neighborhoods? Have a written list of priorities that you can show to your realtor so you don’t waste your time looking at homes that don’t match your search.

Using these suggestions when buying your first home (or any home for that matter) will help the entire process smooth and hassle-free.

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Since buying a home is such a large investment, most buyers need to utilize the services of a mortgage lender to make it happen. But when you borrow money from a lender, they want to make sure they will be getting repaid along with interest. They will ask you many questions before deciding to offer you a mortgage loan. Here are some questions you should expect to answer so you can be prepared with answers and documentation.

1. What is your employment and income status?
Being employed is vital when applying for a mortgage. Your lender is going to want to know many things about your employment status, including where you work, how much you make and how long you have worked there. In addition, they will ask about how you are paid – do you receive salary? Commission? Or hourly wages? Do you have a regular income or is it fairly irregular? Many mortgage lenders will also want to see pay stubs and other income documentation before making their final decision.

2. What debts do you have?
Debt is simply a part of American culture. But if you have too much debt, you are going to have a difficult time finding a mortgage lender to loan you money. Your lender is going to want to know about your auto loan debts, your credit card debts, medical bills, student loans and any other monies that you owe. They will also want to know how much money you have left after making a down payment on the home and paying for closing costs. Bring documentation of your debts and your bank statements when meeting with your lender and don’t try to hide anything. If you do, you could end up with financial problems – or even legal problems - soon after moving into your new home.

3. How much can you put down?
The bigger of a down payment you can put down on a house, the better your chances of getting a home loan. This is especially true if you have questionable credit. When you put a larger down payment on a home, the lender sees that you are financially invested in the home so you become a better credit risk for them. However, they may ask where you got the money from – was it a gift from your parents or did you save up for a few years? This may not have a huge impact on the lender’s decision, but it may still be a factor.

4. What is the purpose of the home?
In most cases, you will be buying a home as a primary residence. However, there are many home buyers who purchase homes as investment properties to rent out or as vacation homes. Your lender is going to want to know what you plan on doing with the home after you buy it so be honest with them about your intentions.

Your mortgage lender is there to help you find a home loan. While they are in the business to make money, they also have a great deal of expertise. If you are honest with them about these and the other questions that they ask, they are in a better position to help you get the mortgage loan.

Compare the best mortgage rates here.

When buying a home, one of the big decisions you will have to make is whether to buy an older home or one that was recently built. Some buyers prefer older homes while others would rather have a newer home and they typically have reasons for preferring one over the other. If you are still trying to decide between the two, here are some advantages and disadvantages of buying an older home.

Advantage 1: Tax breaks for restoring a historic home
If you are thinking of buying a home and restoring it in a historic district, many local municipalities will give you a tax break. Many home buyers like living in historic districts because of the Victorian-style homes and other traditional features. Your real estate agent can help you determine if purchasing a home in a historic district is right for you and your budget.

Advantage 2: Better construction
The adage “They don’t build them like they used to” is often applied to new homes. Today’s builders often do not use the same quality materials that the builders did 40 or 50 years ago. Even though today’s building codes may be stricter than they were decades ago, older homes have stood up to the test of time and they continue to retain their quality and appeal.

Advantage 3: Lower Price
Many older homes come with a lower price tag than today’s homes for a variety of reasons. For one thing, many older homes are owned outright by the original owner. You can often negotiate a lower price with the owner than you can with a builder or a bank-owned property. And since many older homes need repairs, the cost often reflects that need which results in a lowered price.

Disadvantage 1: Need for upgrades
Many older homes need to have upgrades completed before they are considered up to code. The previous owner may have never upgraded anything in the house which means you may need to do so after moving in. And if you want to maintain the original look, it could cost even more to complete those upgrades.

Disadvantage 2: Less space
Homes that were built 40 or 50 years ago did not have the focus on space that today’s homes have. That means that you may have to sacrifice closet space when you purchase an older home. The homes of yesteryear also typically have smaller kitchens and smaller bathrooms because they were “rooms of necessity” rather than luxury.

There are disadvantages and advantages to either type of home that you choose to buy. The best way to make your decision is to determine what is most important to you in a home and let that be your deciding factor.

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As the chart below shows, mortgage rates fell to record lows this week, with 30 year fixed mortgage rate getting close to 4%. According to BestCashCow data, a borrower can get a fixed 30 year mortgage with 0 points at 4.041%. That's significantly lower than than the same time last year, when the best 30 year rates ranged between 4.5-5%.

Both the 15 year and 5/1 ARM have also dropped considerably over the course of the year.

What's responsible for this decline in mortgage rates? You can thank the weak economy and the ongoing public debt crisis in Europe. Both have sent investors scurrying into US Treasuries, which are perceived as super safe place to park cash. As a result, yields on 10 Year Treasury notes have dropped to 2%. Since many mortgage bonds are tied to the 10 year, voila, mortgage rates have been dropping?

Where Are Mortgage Rates Going?

Most pundits believe there is a 50-50 chance of the U.S. slipping into a double dip recession. I agree. The only growth in the economy over the last three years has come from government spending and as the debt ceiling debacle demonstrated, government spending is going away. As I discussed last summer, any budget deal was likely to result in in years of slow growth and potentially a double-dip recession. Nothing that has happened since that time has changed my opinion.

Circling back, years of slow growth mean rates are not going up anytime soon. This is Japan redux. In Japan rates have been low for over ten years now. If Europe melts down further, rates will go even lower. If the Chinese economy implodes, as some think it might do, then rates could drop still further. Even if Europe does not melt down, austerity programs adopted by EU member states will certainly keep growth slow. None of this looks to put pressure on US debt.

About the only scenario I see for a spike in mortgage rates anytime soon, is if the bond markets believe that US debt is unmanageable and begin driving up rates on US Treasuries. But that seems unlikely.

So, if you are buying a home or refinancing, enjoy the low mortgage rates. They are likely to be around for some time to come.

If you have ever shopped for a home or if you know someone who has, you have probably heard the term “escrow” used several times. But do you know what people are referring to when they use that term?

One of the simplest ways to understand the escrow process is this: If you and another person have ever made an informal wager, you may want an impartial third party to hold the money that was wagered for safe keeping. In many ways, this is how an escrow account works when you are getting a mortgage.

When buying a home, you are often required to put money into an escrow account. It is almost like a “good faith” account that shows you are serious about your intentions to buy the home. This money is held by a third party, or an escrow agent. This agent works for both you and the mortgage lender. The agent is responsible for carrying out any instructions that the mortgage lender and borrower require. For example, the mortgage lender may require the homebuyer to deposit money for the property taxes and home insurance. These can be monthly deposits that are then released once the transaction is completed.

In many cases, the escrow money is designed to protect the lender in the event of a foreclosure or repossession of the home. If the borrower does not pay their property taxes on time and a tax lien is put on the house, the lender could use the escrow money in a foreclosure to extinguish the lien and sell the house. Similarly, if the home were damaged or destroyed in some way, the lender would no longer have any collateral if the homeowner failed to pay the premiums on your homeowners’ insurance policy.

An escrow accounts also benefit the homebuyer. Instead of paying your insurance premiums and property taxes in one or two lump sums every year, escrowing the money can spread them out over 12 months (which can be a financial relief for people who are on a tight budget during the home buying process). In addition, escrow agents will request a title search for the home to ensure that it does not have any liens or other problems that could cost you more money and they will record the necessary documents on your behalf.

Escrow payments may change from time to time. Since insurance and taxes often change each year, the borrower may pay more or less on their monthly escrow payments for as long as the escrow account stays open. Lenders typically require up to two months of expenses in your escrow account and they will review your account to adjust your payments accordingly each year.

Before agreeing to put your money into an escrow account, you should understand all of the benefits and ramifications. It is difficult to cancel an escrow account so you should consult with a trusted financial advisor.

Find the best mortgage rates where you live here.

With the number of foreclosures on the market at record highs, many troubled homeowners are looking for other options to avoid the damage to their credit and to simply get out from underneath their home loan as soon as possible.

A short sale occurs when a bank or mortgage lender allows the homeowner to sell their home for less than the balance owed on it. The lender then forgives the remainder of the loan.

Many homeowners have a better chance of qualifying for a new mortgage soon after completing a short sale then were they to go through a foreclosure. Banks too sometimes prefer an owner to do a short sale because it saves them from the expensive cost of a foreclosure. As a result, there are more homeowners who are avoiding foreclosure by going through a short sale.

Last year, short sales accounted for about 10 percent of the number of homes on the market nationwide. That figure has increased by 2 percent and short sales now account for about 12 percent of the homes on the market. In some states – such as Georgia, Michigan, Nevada, California and Colorado - short sales have become still more prevalent. In California, for example, short sales accounted for about 25 percent of homes sold in the second quarter of 2011, a 7 percent increase year-over-year. In Colorado, they accounted for 17 percent of homes sold (also a 7 percent increase year over year).

Bank of America expects to complete at least 100,000 short sales this year, which is twice as many as it completed in 2009. A Well Fargo senior vice president claims that short sales have increased recently because there are not as many bank-owned homes on the market in some areas, leaving eager buyers to actively seek out short sales.

Short sale homes have some benefits over foreclosed homes to purchasers and to the larger community. One of the main benefits for a purchaser is that a short sale home is ordinarily occupied by the seller until it is sold. This helps the home retain its value as the plumbing system and other parts of the house are not left to sit for months or even years at a time. The absence of a long vacancy period also enables other homes in the neighborhood to retain their value.

Are you facing a foreclosure? Have you thought about the option of going through a short sale? Check with a trusted financial advisor who is experienced in mortgages and real estate to see if a short sale is right for you.

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