First-time buyers face the biggest battle in almost 30 years to make it on to the property ladder as the credit crunch sees nervous lenders demand ever-larger deposits.

The average new buyer needs a 17 per cent deposit – the highest since 1980.
Even then they’ll be lucky to get a loan, with banks imposing a clampdown.

The data, from the Council of Mortgage Lenders, dispels hopes of an end to the housing slump any time soon.

First-time buyers accounted for 40 per cent of the 39,900 loans last month.

Although the figure was up 14 per cent, there is always an upturn at this time of the year. Lending was down more than 50 per cent on last November.

About 70,000 loans for remortgaging were agreed, up 12 per cent on October but almost a third less than last year.

The CML’s director general Michael Coogan condemned “conflicting and incoherent” Government policy, with lenders encouraged to pass on rate cuts while beefing up their balance sheets.

http://www.mirror.co.uk

2008 has not got off to the most promising of starts, with talk of utility bills to rise, the housing market is slowing down and where once credit was readily available, we are now finding lenders being more stringent with their lending conditions.

The following are tips/advice on how to help you combat the ‘credit crunch’.

Check your credit report

Find out for yourself what any potential lenders will read about you, your financial situation, payment history etc. It is imperative this reads accurately to put you in with the best opportunity to be approved for whichever financial facility you require. It should list all credit accounts related to you such as loans, mortgages, credit/store cards. It could even list mobile phone contracts and will certainly declare if you have any county judgements against you for prior non-payments.
If there are any inaccuracies on your report, you should contact the relevant companies direct to correct this. Remember, even a small mistake could deter a potential lender from offering you a loan.
Ensure you are registered to vote at your current address. This simple thing can add valuable points to your credit score.

Don’t assume there will be interest rate cuts

While it was good news to hear of the recent 0.25%cut in the base rate, and a couple of others are predicted this year, this is by no means a hard and fast way to rely on solving your financial situations. Even with the latest reduction, not all lenders have passed on the reduction to their customers, and in a number of cases, some have even increased the rate for those who they consider ‘high risk’.

There is no such thing as ‘safe as houses’

The housing market is no longer as buoyant as it was previously and 2007 saw up to 400,000 people refused for mortgages, and a rise of 30% of homes repossessed in the first half of the year.
Anyone who has a special mortgage deal due to finish in 2008, should be prepared to pay a bit more than before, and budget accordingly in advance.
When it comes time to change your mortgage beware of high set-up fees which lenders have introduced to help them counteract some of the losses they have suffered of late. There have been reports on a website of a 46% rise in mortgages with an applicaton charge in excess of £1,000.
It is not all bad news, no, for those of you with some savings behind you, a good job and a good credit report, then this could be your year to buy the property you always wanted.

Face increased prices

It has been widely acknowledged that utility bills are set to hike their prices this year. In the first instance you can cut down a little by turning down your thermostats slightly, refrain from keeping appliances on standby and opt for showers rather than baths. Furthermore, despite prices rising, shop around and make sure you are with the best/most economical supplier. These are easy to research on a comparison website. You key in your information and it matches your needs to the best offers available.

Make your credit status better

Many people use credit to obtain something special they really want- be it a house, holiday, car. The trick is, once credit is obtained, that you handle it wisely.
The best way is to start with a good credit report. If you do tend to miss a payment here and there, then direct debit would combat this. If you have too many payment dates to remember, perhaps consider consolidating all your debts into 1 easy monthly payment (which may in fact save on interest over a period of time too).
Take care not to have too many credit cards on the go. Why not condense them into one and concentrate hard on clearing that. You would look much more appealing to a potential lender by choosing this option.

With all this in mind you should now be better armed to tackle the ‘credit crunch’ face on.

http://www.thriftyscot.co.uk

Millions of Americans are losing, or close to losing, their homes. Foreclosures in the U.S. are hitting record numbers. If you’re having trouble paying your mortgage, learn about the steps you can take to avoid foreclosure or minimize your debt after it happens. Quick action is the key to success — it can save your home or help protect your credit rating.
Don’t give up and let the lender foreclose on your home without considering your options. A foreclosure will hurt your credit rating and make it difficult, if not impossible, to buy another home anytime soon. In addition, if the profits from selling your home don’t cover the unpaid portion of your loan, your lender might sue you for the rest.
Your best options if you’re having trouble making mortgage payments include:
• negotiating with your lender
• getting government help
• filing for bankruptcy
• selling your home yourself, or
• Giving your home deed to the lender.
Beware of scam artists. People facing foreclosure are often preyed upon by others claiming they’ll “help.” Some homeowners have unwittingly signed documents giving these scammers title to their property, turning the owners into renters. Don’t sign anything without getting a professional opinion first.
As soon as you realize you’ll have trouble paying your mortgage — ideally, before you’ve missed any payments – contact your lender. Now, more than ever, lenders are willing to negotiate with home loan borrowers, if only to reduce the number of foreclosures they’re dealing with.
Do it sooner rather than later. If you call soon, you may be able to work out a solution with your lender. But if you’ve already missed three or four payments, it may be too late, and the lender may insist on foreclosure.
Possible solutions- The lender may accept partial payments for a few months, accept a late payment, or agree to redo the terms of your loan.
What to say when you contact your lender. Here’s what you should ask for in lender-language.
Forbearance- You make a reduced payment, or no payment, for an agreed-upon period of time. Usually, the lender requires you to make up the difference at a later time. The lender is most likely to agree to this if you can demonstrate that you will soon receive a bonus, tax refund, or some other extra cash.
Loan reinstatement- You agree to make up your missed (or reduced) payments by a specific date.
Loan modification- Your lender agrees to alter the terms of the loan so that you can better afford the payments. For example, the lender may agree to add your missed payments to your loan balance, to stretch out your loan over a longer term (which will lower your payments but result in more interest over the life of the loan), or to convert an adjustable rate to a fixed rate mortgage.
The U.S. government is currently discussing ways to help homeowners facing foreclosure. In the first plan to be implemented, FHASecure, the Federal Housing Administration may grant FHA refinancing to borrowers who can show:
• a history of on-time mortgage payments before the borrower’s teaser rates expired and the loans reset
• interest rates that have reset between June 2005 and December 2008
• 3% cash or equity in the home
• a sustained history of employment, and
• Enough income to make the mortgage payment.
Of course, many people won’t be helped by FHASecure, particularly if they’ve lost their job or their house’s value has declined. Keep your eyes on the news for other programs or forms of relief.
Filing for bankruptcy may help you keep your home, or at least get you out from under your mortgage. When you file, the foreclosure process is legally stopped (called an “automatic stay”). It can’t be reopened until your bankruptcy case closes or the lender gets court permission to proceed (called “lifting the stay”).
If you simply can’t afford the house you own, the above options won’t help. You will probably lose your home. But don’t wait for your lender to make the first move. If your home has appreciated in value since you bought it, you may be able to sell it yourself. Again, contact your lender, who may let you stop making payments until the house is sold.
Ideally, the proceeds from the sale will cover your mortgage and selling costs. But if they won’t, ask your lender to consider what’s called a “short sale.” That means the lender accepts the sale proceeds even if they’re less than the amount you owe.
If no one is interested in buying your house, your lender may agree to take the deed and cancel your debt. This is called a deed in lieu of foreclosure. The idea is that the bank can then sell your house (as with an actual foreclosure) but won’t report it as a foreclosure to the credit rating agencies — in fact, you can negotiate with the bank about how it can help you preserve your credit rating.
Short sales and deeds in lieu of foreclosure will no longer leave you owing taxes. In the past, the IRS considered forgiven debt to be taxable income. However, this was erased for situations where the loan was for a primary residence, by the “Mortgage Forgiveness Debt Relief Act of 2007,” or H.R. 3648.

The financial squeeze that’s left millions of Americans falling behind on their mortgage payments doesn’t seem to be letting up. For some, that presents a stark choice: is it better to lose your house to foreclosure or file for bankruptcy protection?

Neither option is going to be easy. Generally, a foreclosure will remain on your credit report for 7 years, while a bankruptcy remains for 10 years. But that doesn’t mean foreclosure is necessarily the better option, according to Ray Hooper, Education and Housing Director for the Consumer Credit Counseling Service of Greater Dallas, a non-profit agency that tries to help people facing foreclosure keep their homes.

“A foreclosure is very serious to mortgage lenders,” said Hooper. “They’re going look at a foreclosure more seriously than they will a bankruptcy that doesn’t include the house.”

Before you accept that foreclosure is a foregone conclusion, consider trying to avoid it. If you’re having trouble making payments, or even behind by a month or two, contact your lender before the process goes any further. Even if you’ve gotten an official “notice of default,” saying you’re several months behind, you still have time before the formal foreclosure process begins.

The first question you need to decide is whether you want to keep your house or give it up. If you want to keep it, you need to try to work out a plan to get back on track. This involves either making up for the missed payments – which you can do all at once or try to spread out – or coming up with a new plan. One option is to have the loan modified – at a lower interest rate, for example. Or you can ask for “forbearance,” which basically means the lender suspends payments until you can get back on your feet. If you’re in over your head and bought too much house, though, these options probably aren’t going to help.

So you may have to consider moving. Even if you do lose your house, you don’t want a foreclosure on your record when you go looking for a smaller house or a place to rent. One option is to ask the lender to hold off on foreclosing until you sell. If your mortgage is bigger than your house is worth, you’re looking at what’s called a “short sale” and you’ll owe money to the lender even after the house is sold. In some cases, lenders will let you off the hook for that amount rather than go through the expense of foreclosing. (But you may not be completely off the hook: you may owe taxes on that amount.)

You can also try something called a “deed in lieu of foreclosure” – which basically means you turn over your house to the lender and walk away without owing anything. But you’ll need to work this out with the lender: you can’t just leave the keys in the mailbox.
While it’s possible to work out one of these solutions with your lender on your own, you may have better luck with the help of someone who specializes in the process. A good attorney who knows real estate law can help, but you may not be able to afford that. A credit counselor is another option. Lenders are more likely to go along if a competent third party is there to help smooth the process.

If all else fails, you may have to consider allowing foreclosure to proceed – or filing for bankruptcy. But like most aspect of personal finance, there’s no “one-size-fits-all” guidelines for which is the least bad alternative. There are different ways to file for bankruptcy, and not all of your debts have to be included, so even if faced with bankruptcy, you’ll need advice from someone – either a good credit counselor or a bankruptcy attorney – who can walk you through the choices you’ll face.

While it’s not an easy option, bankruptcy is becoming more common. Some 391,000 individuals turned to the bankruptcy courts for help getting out from under debt during the first half of this year, according to the American Bankruptcy Institute. That’s up nearly 50 percent from the first half of 2006. While that’s down from levels seen before changes in the law in 2005 made it harder to file, the ABI said the number of filings is expected to continue to increase.

“Continued pressure on housing markets, combined with high consumer debt burdens, will lead more households to consider bankruptcy as an option to their financial problems,” the group said in a recent press release.

While the bankruptcy process in the U.S. is governed by federal laws and handled by a system of federal bankruptcy courts, state laws regarding consumer debts and the disposition of property also come into play. There are also different types of bankruptcy filings. No matter which course you take, the filing stays on your credit record for 10 years. That makes it very difficult to get any type of loan during that period; the loan will be more expensive if you can get one.

The two most common forms of personal bankruptcy are called Chapter 7 and Chapter 11. (About 60 percent of those who file for bankruptcy use Chapter 7, most of the rest use Chapter 13.) Under a Chapter 7 filling, you get to keep certain property (this is where state laws vary), but the rest is turned over to a court-appointed trustee who sells your stuff or gives it to lenders to satisfy your debts. Under a Chapter 13 filing, you pay back your debts under a plan worked out by the court. The trustee collects payments, pays off your debts and makes sure you stick to the plan.

If you own a business, you may want to consider a Chapter 11 filing. This let’s you stay in business, as long as the court and the people you owe money to approve of the plan to pay off your debts. If the court decides a trustee needs to be appointed, the trustee takes control of your business and its assets.

Not all debts can be wiped clean – even if you ask for a “discharge.” The list includes alimony and child support, taxes, court fines and most student loans. New debts, taken on after the discharge, aren’t included. And if the judge finds out you’ve lied or committed fraud, your discharge can be denied.

You can also choose which debts you want to have discharged while you keep paying off others. You might want to work out a payment plan so you can keep your car, for example. To do this, you have to sign a “reaffirmation agreement,” which says that you promise to pay off that debt. If you don’t pay it back, the creditor can send it to a collection agency like any other debt.

If you’ve filed a Chapter 7 bankruptcy and gotten a discharge, you’ve got to wait 8 years before you can do it again. There are different limits on filing for Chapter 13, depending on whether you’re trying to get debts discharged.

Whatever you decide to do, you’ll probably want some help. Start with a good credit counselor or bankruptcy attorney. Get references, ask lots of questions, and don’t sign anything until you’re sure you understand fully what it says.

With 1.6 million people filing for bankruptcy each year, the changes will have broad impact. What should you do if the debt you’re facing looks like a mountain and you’re worried the safety net has been pulled out from under you? Here are five tips.

Consumer advocates say if you’ve been considering filing for bankruptcy protection, but have delayed, you should go ahead and start the paperwork now. Once the many elements of the law take effect in 180 days (six months), bankruptcy as we know it will have changed to an unfriendly landscape.

The new law makes it much more difficult for filers with a median income higher than the average to file for bankruptcy. Henry Sommer, President of the National Association of Consumer Bankruptcy Attorneys, says that under the terms of the new law, bankruptcy will become more expensive and more burdensome. Consumers will have to file complicated forms and take credit education courses before even getting to file.

One bankruptcy attorney says consumers are already shopping attorneys. “My phone rang off the hook and I expect others had the same experience,” says Bill Brewer, an attorney in Raleigh, N.C. Both Sommer and Brewer advised that consumers who are trying to figure out whether bankruptcy is for them hire an attorney who specializes in bankruptcies.

If you’re thinking about taking out home loans to avoid bankruptcy, you might want to rethink that strategy. By adding debt to your home, you are putting it at risk. Sommer says he’s seen people who too out home loans and then filed for bankruptcy, get into serious trouble.

That’s because bankruptcy does not excuse you from paying your mortgage. If you’re in serious debt trouble and can’t meet your mortgage obligations while under bankruptcy protection, you could lose your home.

Another reason that you shouldn’t take home loans to pay off your debt: you’re likely to pay an extremely high interest rate, which could aggravate your situation.

Plus, institutions may be looking to take advantage of you. Sommer says that consumers struggling financially should avoid any institution offering “debt consolidation mortgages” — that’s code for predatory loans. Sommer advises talking to a bankruptcy attorney to see if filing is right for you, before you put your house at risk.

Many consumers deep in debt consider hiring a credit counselor to help clean up the mess and get their credit straightened out. And the new bankruptcy code will require you to see one.

Unfortunately, there is a rash of scammers out there willing to prey on those who really need help fixing their credit. The Federal Trade Commission is undergoing a major investigation into several cases of consumer fraud. Their recommendation is that you check out credit counseling services with your state’s attorney general’s office and the Better Business Bureau.

Remember, a credit counselor is just that. If you are hoping for advice on whether or not to file for bankruptcy: consult a bankruptcy attorney. Experts say you’ll need a sharp one to navigate the new bankruptcy seas. Be sure to check out any attorney you hire with your state attorney general’s office or bar association.

The new bankruptcy law should persuade all Americans to take control of their debt. The primary cause of debt problems for many Americans is credit cards. The average credit card balance is $12,000. And 10 to 15 percent of households with credit card debt are barely able to pay it off, says Steven Brobeck, executive director of the Consumer Federation of America.

For that reason, you’ll want to lower credit card balances and keep a close eye on your credit reports from companies like Equifax, TransUnion and Experian.

How do you know if you’re in trouble? One rule of thumb: If you can’t develop a plan to pay off your credit card debt in a year and at the same time meet your other debt obligations, you probably need help.

The consequences of not monitoring that debt, says Brewer, can be severe. “What this law does is say to people your responsibilities are first to pay MBNA and Citibank and maybe we’ll leave enough to provide for your children,” he says.

By Gerri Willis who is a personal finance editor for CNN Business News and the host for Open House.

In January, we’re supposed to sit down and organize our personal finances. This year you can risk your good-girl reputation with a subversive idea: go bankrupt in 2009. If you’re reaching the end of your rope, don’t try to hold on. Save what you can.
It’s painful and humiliating even to consider bankruptcy, let alone join that crowd in the courthouse corridor, waiting for your name to be called. Normally one would say suck it up, cut spending and repay your consumer debt. But that’s not always possible, especially with an economic tsunami rolling over your home, job and health insurance.
Most families, honorable to the end, struggle longer than they should, says Katie Porter, a law professor at the University of Iowa. By the time they give in, they’ve lost assets they could have used to start over again. That defeats the point of bankruptcy—to stop the self-blame and hopelessness that goes with bad luck and bad bills, and give yourself a second chance.
The right time to go bankrupt is when you’re financially stuck but still have assets to protect. You can use Chapter 7, the most popular type, only once in eight years, so draw up a “no kidding” plans for living on your income when you’re finally clear. “If you’re out of work, try not to go bankrupt until you have a new job and can see what’s ahead of you,” says Harvard Law School professor Elizabeth Warren.
It’s a mistake to tap your retirement accounts to make minimum payments on monstrous bills. IRAs and 401(k) s are largely protected in bankruptcy, as is most of your child’s 529 college-savings account. This money is your future. Leave it alone and use credit cards for your necessities. Card issuers know that some of their customers will fail. That’s why they charge elephant fees.
Your health is your future, too. You’re doing your family no favors by forgoing medical treatment because you can’t pay. Bankruptcy eliminates medical as well as consumer debt.
Bankruptcy can even help you save your home, especially with home values down and so many mortgages underwater. You’re allowed to keep a limited amount of home equity in most states. If the house is worth less than the mortgage plus your home-equity exemption, you can file for Chapter 7 bankruptcy, wipe out your consumer debts and still keep your home, provided that your mortgage payments are up to date, says Stephen Elias, a California bankruptcy attorney and coauthor of Nolo Press’s do-it-yourself bankruptcy books. If your house is worth more, however, or you’re behind on your payments, it will likely be sold.
When you’re behind on the mortgage but have a new job with money coming in, choose a Chapter 13 workout. Your lawyer will negotiate a three- to five-year plan for paying your debts, including the mortgage arrears. Some people stay in the plan just long enough to get current on their mortgage and then resume their normal lives, Porter says. The next Congress may sweeten Chapter 13 by allowing a judge to reduce (or “cram down”) your mortgage principal if the debt amounts to more than the house is worth. That would save a lot of homes.
Don’t try to preserve your house if you’re going broke. Stop making payments, stay there while foreclosure is underway, then move out and rent. If the mortgage is underwater, “you’re already functionally renting because you have no equity,” says Adam Levitin, a professor at Georgetown University Law Center. In theory, many states allow lenders to chase you for the sum still owed after the house is sold. But that’s rare, Warren says. Lenders know that you probably can’t pay.
Foreclosures stay on your record for seven years and bankruptcies for 10. If you re-establish good bill-paying habits, you may get decent credit even sooner. And you’ll start fresh, which is what a new year ought to bring.