When our industry was flooded with easy money such as exotic mortgages i.e. 1% mortgage rates and the lure of lower payments and more house associated with adjustable rate mortgages has caused the ripple effects of an unseen record number of foreclosures in today's markets.
The most common causes of foreclosures are life events, such as: - Death in the family - where there is no life or mortgage insurance in place, so not only does the family loose one income, but they also now have the expense of funeral arrangement, which can be costly.
- Unexpected Medical Expenses - examples include but not limited to diabetes, cancer, pneumonia etc, where the homeowner or member of the family does not have health insurance when these medical expenses occur.
- Divorce - one of the spouses become emotionally attached to the house and has to figure out how to make ends meet with one income and are willing to make the sacrifice even if it means living pay check to pay check, instead of selling and starting over.
- Job Loss - caused by downsizing, lay offs or being terminated, has the greatest impact on 1 income families that have limited savings and or insurance.
Foreclosure in itself has numerous negative impacts not only financially but emotionally which can lead to depression, divorce and tear families apart. The number 1 cause of divorce stems from financial issues, which include foreclosure. Its not uncommon for someone that went through foreclosure to also go through a divorce, have damaged credit because of the foreclosure, and to make matters worse they cant even rent an apartments as they are being denied because of the foreclosure, which makes it real hard to start over.
Here are some tips to prevent Foreclosure......
1. Make your mortgage payments within the 1st 30 days of each month - if you make your loan or mortgage during the first 30 days, the bank will have no reason to start foreclosure proceedings. Even though after the 15th of the month it's considered a late payment, this will not report late on your credit if it is made by the 30th of the month. Foreclosure Proceeds usually start after the 3rd or 4th consecutive month of being late.
2. Pay your Mortgage first - When it comes to prioritizing pay for the roof over your head first, instead a lot of home owners make the mistake of paying for their credit cards or utilities first.
3. Protect your credit - In our credit driven society it is important to understand that when it comes to big purchases like buying a home, your credit rating is the most valuable thing you own. Try to minimize borrowing and make prompt payments on all your bills.
4. Avoid debt - before becoming a home owner try and eliminate as much debt as possible and try and save a 10-20% down payment. Try to live within your means and only use credit if you are sure that you can meet the repayments.
5. Communicate with your lender - Open communication is paramount with your lender. Make payments on time and reply promptly to letters and phone calls. Lenders are more likely to be flexible with people who demonstrate a mature and responsible attitude to loans. Remember lenders are not in the business of Foreclosing, they are in the loan business, and they rather collect interest payment than repossess a house.
6. Start an emergency fund - set aside some money every week for an emergency fund each case is different but a $2000-$5000 fund is recommended and only dip into it if there is a real emergency. Emergencies include but not limited to job loss, car repairs etc.
7. Establish a home equity line of credit - when you purchase your home, arrange a home equity line of credit for use in an emergency.
8. Consider job-loss or mortgage life insurance - for an additional monthly premium, you can obtain cover that guarantees your mortgage payments if you lose your job or pass away unexpectedly.
9. Know your rights - read up on the rules and regulations governing credit and foreclosure. If you know your rights, you stand a much better chance of keeping your home if you do go into arrears.
10. Beware of scams - If you are foreclosure you will become prey to investors or want-to-be investors out there waiting to make money from foreclosures and not all are legitimate. Be wary of buyers who offer to buy out your mortgage or private counseling firms who charge for things that you can do for free yourself.
11. Brush up on bankruptcy law - Majority of homeowners who find themselves in foreclosure file bankruptcy to save their homes, although bankruptcy is a good option for some, it is not for all, just like foreclosure, bankruptcy should be avoided at all cost.
About the Author
Marlon Baugh is a nationally-known mortgage expert. Since 2003, he has specialized in mortgage loans for people with Bankruptcies, Foreclosure or with other credit issues, as well as Loss Mitigation and Commercial Mortgages. If you would like a Free Copy or to get instant access to the remainder of this Insider Mortgage Report, please visit http://www.specializedfinancialsolutions.com/foreclosure.htm or Call 954-678-5796
