A (HOME) Score

If you knew that you could not - in fact - afford the home loan you were pre-approved for, would you convince yourself otherwise? Would you go for it anyway? Of course not!

No well-meaning person would accept a mortgage that would guarantee a path to foreclosure. Unfortunately, there are many homeowners out there who have found themselves completely blindsided by the true costs of their home loan. This problem is just one of many at the center of the current housing crisis. Many homeowners just did not have the means to properly interpret their mortgage options and compare them to one another.

Recognizing its importance, the National Association of Realtors has provided homebuyers with buyer agency. But here's the problem; there is no clear mechanism within the mortgage industry to extend the same agency relationship to borrowers. Unless a lot of time is invested in "reading up" on mortgage options, how is a borrower able to make a good decision? And is that really enough? Where's the expert advice needed to arrive at a truly informed decision?

Now that the election is over, prospective homebuyers are wondering what they can expect from the new Obama Administration. Barack Obama has followed the subprime mortgage industry for years and has already taken steps to create protections for homebuyers. One of his plans will create a mandate for clear, complete, and honest information about home loans. It will take the form of a (HOME) score.

This mandate will give you the means to not only understand all of the costs entailed in your home loan, but it will make it easier for you to compare them too. One thing is certain. This mandate must be written effectively so as to accomplish what it intends to. Borrowers can't be helped by a mandated accurate loan disclosure that is not accurate.

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Mandate Accurate Loan Disclosure: Today's subprime mortgage problem stems in large part from the lack of easy-to-understand information that borrowers receive from mortgage brokers. As president, Barack Obama will enact laws to ensure that all prospective homebuyers have access to accurate and complete information about their mortgage options. Obama and Biden will create a Homeowner Obligation Made Explicit (HOME) score, which will provide potential borrowers with a simplified, standardized borrower metric (similar to APR) for home mortgages. The HOME score will allow individuals to easily compare various mortgage products and understand the full cost of the loan. The HOME score would also help borrowers understand their long-term obligations and would be required to include mandatory taxes and insurance.
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