Nearly every night on the evening news you hear something about foreclosures. It sometimes sounds like people are losing their homes left and right, and while there are certainly some homes being foreclosed upon at any given time, there are ways to avoid this fate yourself.
If you haven’t purchased a home yet, you may not have given foreclosure issues a thought – you should. Now is the time to plan ahead for the unforeseen circumstances that may lead to a future foreclosure on your property. First, be certain you can afford the loan you are taking out. If your mortgage payments will keep you too close to your budget’s edge, something like having your hours reduced at work could start the chain of events that lead to foreclosure. Make sure you can easily afford the payments before you sign off on the loan.
Second, when deciding on what kind of mortgage rate you will be getting, fixed or adjustable, keep in mind that while the adjustable rate might be enticing when you’re initially approved, it can change dramatically later on. So much, in fact, that your payments can quickly jump into the “unaffordable range”. A fixed rate mortgage will never change, therefore neither will your payments.
If you already have a mortgage with high payments, you can try to refinance at a lower rate. Unfortunately, if you’ve already missed payments, it’s unlikely any lender will work with you. This action should be taken after you have the mortgage, but before things get too bad. After paying off a portion of the principal of the loan, refinancing can reduce your payments by hundreds of dollars per month, virtually eliminating the chance of foreclosure.
Sometimes all the planning in the world can’t foretell every financial hardship. If you’ve missed a mortgage payment, the first thing you should do is call the mortgage company. Don’t hide from your obligation – contact the lender and explain what is happening and why. Most mortgage companies will work with you, even helping arrange a repayment schedule, since what they want is simply to be paid. Mortgage companies would prefer not to foreclose on properties – they’re in the business of making money through lending, not via home sales. Keeping communications open is crucial to working with your lender and avoiding foreclosure.
In the worse case scenario, where you can’t make the payments or the lender won’t work with you, the final option is selling your home. This is tough to do quickly, though, and the sale must close prior to the lender repossessing the home. If you can manage that, however, you’ll lose the home but gain the ability to pay back the amount due the mortgage company – with possibly some left over for yourself.
Foreclosures are an unfortunate part of life, but they don’t have to be a part of yours. Plan accordingly and do what you must to keep the home you worked so long and hard to get.
Jim Miller is a full time full service licensed Realtor® in the Southern New Hampshire area with Bean Group and has many years of experience buying and selling New Hampshire Real Estate .
Contact Jim direct at 603-801-3987
Home Buying Tips