Okay, so foreclosure's not exactly a four-letter word, but it's definitely the most dreaded 11-letter F-word for homeowners. Foreclosures may be at record highs, but that doesn't mean you have to be a part of another sad statistic. Here are 3 common reasons homes end in foreclosure and how to avoid letting your home become one of the masses.
- You weren't realistic and honest about your financial situation. You were not completely honest or maybe you stretched the truth about your finances on your home loan application.
Solution: It is important to view your financial situation honestly to succeed in the world of homeownership. Look at your budget and see if you can comfortably accommodate the monthly mortgage payment. If it looks doubtful, wait a year, save your money, repair your credit history if necessary, and then try again. Keep in mind that rates and payments can fluctuate depending on your loan type. If you are already in the home, consider taking advantage of the recent Fed cuts and refinancing your current loan.
- You signed a loan agreement without understanding it. You signed where you were told to sign, but you have no idea when your rate will adjust or how your new rate is determined.
Solution: It is important to read and ask questions when signing any mortgage loan agreement and additional documents. Make sure you read disclosures and documents that detail any future rate adjustments and how they will affect your future payments. You can call your lender and ask questions. Knowing the details of your loan agreement can also help you make certain decisions concerning refinancing and pre-paying your loan.
- You have been avoiding your lender for weeks or months. After missing payments, lenders will attempt to contact you to retrieve their payments. You avoid your lender as a way of avoiding your payments
Solution: Keep your avenues of communication open. Avoiding contact with your lender will not alleviate your problem. Communicate with your lender even if you've only missed one payment. Letting them know what is going on will demonstrate that you are making an active attempt to alleviate the issues. Many lenders will be open to negotiating payment options and plans to keep you in your home.
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