How Do I Avoid Foreclosure?

How do I avoid foreclosure? To avoid foreclosure on your home, do not buy more of a house than you can afford. Foreclosure happens when a borrower does not make the monthly mortgage payments. In the foreclosure...

Foreclosure happens when a borrower does not make the monthly mortgage payments. In the foreclosure process, the lender repossesses or sells the home that is securing the defaulted loan. A defaulted loan is one in which the mortgage payments have not been kept up to date. The lender can recoup the monetary value of the loan in this manner.

"Make your monthly payment and you will not go into foreclosure," advises Stephen Edwards, an employee of Waterfield Financial Company, a privately owned mortgage company. This is the simplest way to avoid foreclosure. Pay your monthly mortgage on time.

Due to the unsteady economic climate of today, foreclosure is always a potential risk. The loss of a job or unexpected medical expenses can create financial hardship. To avoid a foreclosure, "the first step is not to buy more of a house than you can afford," says Edwards. Guidelines indicate that monthly mortgage payments should not exceed 28% of monthly income. "Be careful of how much money you are borrowing."

"If you have a low rate on an adjustable rate mortgage, then two to three years down the road the interest rate creeps up." Edwards says, "You could be paying a higher monthly payment than you thought." It is important to realize that "your income may not increase, and your debts may increase." Therefore, while an adjustable rate mortgage may seem like a good idea, it may not turn out to be a good idea.

The homeowner can use several additional strategies to avoid foreclosure. Each of these has the same goal in mind- to economize and safeguard against going into default"

Live with a financial budget.
Maintain a marginal bankroll for bad times.
Calculate the numbers before you make the actual commitment to a loan.
Look around for the best possible mortgage deal.
Be prepared for possible changes in your financial status and adjust for them.

If the worst-case scenario does occur, and you do go into foreclosure, options exist that can alleviate the situation. The first step is to contact your lender and apprise him of your situation immediately. Contact the lender's mitigation department, explain your current situation, provide as much financial documentation as possible, and express a desire to rectify the situation.

Repayment of the loan is the lender's primary goal. After all, lenders are in the business of loaning money to qualified borrowers. Repossessing homes is a final solution, not an ideal solution.

Ideally, a compromise can be agreed upon depending on your personal situation. Perhaps a temporary loss of income or an additional expenditure has created a negative financial situation that will pass in time. If you can show that you are able to improve upon your financial setback through financial and personal documentation, then a deal may be set in place. In this case, the lender may agree to extend the term of the loan and/or temporarily lower your payments.

Realistically, at this point, the only thing that will prevent repossession of your home, a foreclosure, is the repayment of the loan. Everything else is simply a delay tactic. Therefore, the best advice on how to avoid a foreclosure is simply to be able to afford the home that you buy and make your monthly mortgage payments on time.

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