I found a flyer in my inbox today. It was headlined:

ATTENTION AGENTS

IT'S BACK

What is back, you ask??

100% LTV (Loan to Value). So, basically we're talking 100% mortgages. The flyer goes on to detail all the mortgage options available including no income, no asset, no employment verification and "no doc" mortgages.

First of all, I'm not opposed to a variety of mortgage options and even "no docs", mortgages where they basically run your credit and take you at your word for everything else, do have their place. In fact, several states have now outlawed no doc mortgages and I believe that's a mistake.

The problem is that these instruments have all been overused! There is a legitimate market for each and every one of these products. But they should be niche products, appropriate for a small subset of borrowers.

But the flyers mass delivered to real estate agents all over the area make me wonder whether we've really learned that lesson yet. I'll give them the benefit of the doubt and assume that they just want me to know that the products do still exist. I sure hope this doesn't mean that these products are still being widely offered.

Given what we've seen in the mortgage market in the last couple of years, if you're in the market for a mortgage choose your lender carefully both by the company's reputation and that of the individual. And, even then, remember that it's your responsibility to fully understand what you're committing to. Read the fine print and if you don't understand something ask more questions. If anyone says "trust me" or tries to push you into something you don't feel comfortable with, run for the hills!

So, we're all forewarned now. If we're paying attention there's no reason that we should still be seeing these horror stories a couple of years from now!

And I think I'm going to toss that flyer!

We've talked a little bit here about what to do if foreclosure seems to be looming as a possibility. And if anyone you know needs help in that area I'm happy to talk with them privately and see what I can do.

But what about if you're a buyer and decide to buy a foreclosure? Is the buying process any different? And, if so, how? With the increasing numbers of foreclosure properties available for foreclosure it seemed like a good time to discuss the possibilities.

First of all, you should expect a good deal on a foreclosure. Note that I didn't say you should expect a "steal!" Financial institutions really do not want a large inventory of unsold homes sitting on their books. And they will do what they have to in order to get them sold. I showed a property in foreclosure last weekend where it was priced over $100K below a very comparable property just two doors down. The main difference was that the other house was not owned by a bank!

You should also know that the property you're buying is almost certainly being sold in "as is" condition. That doesn't mean there's anything wrong with it. But it does mean the financial institution is not going to allow you to write an offer contingent on a home inspection. They want a solid contract with no loopholes and they don't want to have to negotiate getting the garbage disposal fixed! If you're considering buying a foreclosure you'd be well advised to have an inspection done before putting an offer on the property.

You should expect a more cumbersome buying process. In most cases, buying a foreclosure will entail additional paperwork. Exactly what that includes will vary with the lender involved. But make sure your real estate agent carefully reviews any additional addendums with you. You need to understand everything you're agreeing to.

And, you should expect this process to take longer than usual. While it's not at all unusual to fax an offer on a property and receive at least a verbal response within 24 hours, that's definitely not the case with a foreclosure. Be prepared to be patient! You will likely wait quite awhile for an answer as to whether or not your offer is accepted.

One last thing to be aware of. It is becoming more common for the financial institution that owns the property to insist that the new buyer use them for financing. Ask your real estate agent about this as soon as you identify a foreclosure property you're interested in. It's best to go in knowing what's required. If you're interested in a property with this kind of stipulation, I'd recommend qualifying with another lender first so you'll know whether you're getting a fair shake from the lender who owns the home. If you really believe it's not a good mortgage program for you, try negoitating on that point. Remember, they do want to unload the house. You may be able to either get more reasonable terms or persuade them to let you use your own lender.

Remember, you don't get if you don't ask!

Foreclosures can be a terrific deal. But you need to know some of the differences you're likely to encounter in the transaction. Surprises during a real estate transaction are hardly ever a good thing!