FORECLOSURE (Part I): A Cruel Reality of the DC, Maryland, Virginia Real Estate Market.

More and more homeowners in the DC, Maryland and Virginia area are finding themselves with the cruel reality of foreclosure. In the last couple of years many would be homeowners got adjustable rate mortgages because of their low introductory interest rates. But this is about to change in the coming months since many of these loan will adjust to a much higher interest rate. This adjustment is causing waves of panic in many homeowners since their options are limited.

So what is a homeowner to do if they are found in this predicament? Nancy Trejos, a Washington Post staff writer, wrote an article in this weekend's Post titled "Fending Off the Mortgage Crunch" outlining the various options that homeowners have to save their homes and possibly their credit rating.

The first option that was offered was to refinance the current mortgage into a more stable long-term loan, such as a 30-year fixed. For many this is simply not an option. The reason? There is no equity in the property to cover the cost of the refinance and the homeowner does not have the funds to cover the cost out of pocket. Also the majority of the banks no longer refinance to 100% of the current appraised value--some banks only go as far as 90 to 95% of the appraised value.

The homeowners that bought their property several years ago (4+ years) can refinance it today if they have a considerable amount of equity (10-20%) in their homes. Interest rates have been coming down slowly but surely and the unemployment rate is still low. Bankrate posted today that the average 30 year fixed mortgage has come down from 6.12% last week to 6.10% and banks are still in the business of helping consumers refinance their current loan. Except nowadays, the only applicants they will consider have credit scores above 700 and a considerable amount of equity in their homes.