Before Foreclosure

 

 

Avoid Foreclosure Before It Begins

Foreclosure is never the same. There are as many reasons that it occurs as there are individual situations, before foreclosure there are common events that occur in all of them. Avoiding foreclosure is a little like steering a large ship the sooner you start to make a course correction the more likely it is that you will have a favorable result. Listed below are some initial indications that home foreclosure may become a problem.

• Rising Adjustable Mortgage Payments
• Job or Self-Employment Related Loss of Income
• Divorce Or Separation
• Disability Or Death of Family Member
• Recurring Debt Consolidation
• Making Minimum Credit Card Payments
• Consistently Late Payments On Utility Bills
• Missing Your First House Payment

Recognizing that these events can affect your financial well-being is not enough. Taking the time to make a contingency plan is paramount when these events become a part of your life.If you are experiencing any of the situations above and do not have an ironclad solution you should begin to plan now to restructure your assets, debt, and income.

Before Foreclosure - Month One

Last month you could not afford to pay all of your bills so you skipped your first payment expecting to catch up on it. Now another payment is due. You are now officially in the foreclosure timeline. Take a deep breath and realize that barring some unexpected "gift" your lifestyle is going to change. Now is the time to set your priorities.

Of all of your assets your home is probably the hardest to replace. With foreclosures on the rise lenders are tightening credit and mortgages are becoming harder to qualify for. If you realize that your lifestyle has to change why not choose to change those things which will affect you the least.

Before Foreclosure Is The Best Time For Planning!

Start with credit cards. Financing lifestyle with credit cards and refinancing that debt into a home equity loan is probably one of the major contributors to home foreclosures. It stands to reason that if you cannot afford to pay cash for something then you certainly cannot afford to pay that price plus 25% interest! Just close the accounts and throw them away. It's a lot better to owe credit card companies money than it is to live under a bridge!

Next review your vehicles. It is unlikely that you owe less than your car is worth. Financing a depreciating asset leaves you "upside down" for nearly the full term of a 60 month auto loan. Even at 0%! If you can trade the vehicle in and save money on payments consider it. People won't think your car is very sexy if you are living in it anyway.

After credit cards and cars start thinking about what you eat. For a lot of people where and what they eat is one of their largest expenses. If you eat out every day and have a few drinks here and there you could be virtually consuming your house payment every month.

Now that you have taken a serious look at cutting your expenses you will be able to determine if looking at your expenses is enough. If reducing expenses still doesn't get you there consider increasing your income. This is usually much harder but if it is possible don't overlook it.

After you have made a serious effort to restructure your income and expenses if you have a partner it is time to sit down and agree that you both will adhere to your new plan. Half a plan won't cut it.

Time To Downsize?

When all of the above is accomplished you should be able to determine if you can afford to keep your home. If you determine that you can then call your mortgage lender and work out a plan before foreclosure begins to catch up on your payments. A word of caution. If you make an agreement, make one that you can actually afford. You usually only get one chance on this so make sure that you can do it.

If you have reviewed your situation and find that no matter how you restructure your finances that you cannot afford your home then it is time to downsize. Selling your home in today's market can be quite a challenge, especially if you have a set amount of time to sell it in. Contact a realtor in your area and discuss the possibility of selling your home before foreclosure. Some lenders may delay the foreclosure proceedings if they are aware that you are making a good faith effort to sell your home. Continue To Before Foreclosure - Month Two