Buying a house is a wonderful but major purchase. You may have been on track with payments for years when an unexpected life event wrecked your finances. Or maybe you are in the market for a new home but want to avoid foreclosure in the future. So what can you do? There are a few foreclosure prevention options that may be available to you.
What Does Foreclosure Mean?
First, what is foreclosure? Here is what Zillow says about it:
Foreclosure is what happens when a homeowner fails to pay the mortgage. More specifically, it’s a legal process by which the owner forfeits all rights to the property. If the owner can’t pay off the outstanding debt, or sell the property via short sale, the property then goes to a foreclosure auction. If the property doesn’t sell there, the lending institution takes possession of it.
If you are behind in your mortgage payments or know that you won’t be able to pay next month, you are in danger of foreclosure.
Foreclosure Prevention Options
The best foreclosure prevention is to have a deep savings pool to cover unexpected financial hits. While this is difficult for most families, it can still be a financial goal to have. Another important move to make is choosing the right “amount of house” for your budget. Typically, housing expenses should not exceed a third of the budget. This includes taxes, insurance, utilities, etc.
If you are in the market for a home, choose a house that easily fits in your budget. This means your mortgage should be less than your current rent payment. This is because there are additional homeowner costs you don’t need to pay as a renter. You may need a lawnmower, replace a large appliance or pay a steep cost for a plumber. Building in these kinds of costs into the budget before purchasing a house is a great foreclosure prevention step.
Now, for those already struggling, there are options that American Consumer Credit Counseling can offer. Speak with a foreclosure specialist to learn more about:
- Consequences of foreclosure
- Possible repayment plans
- Forbearance agreement
- Loan modifications
- Refinancing options
- Possible sale of your home
- Pre-foreclosure sales
- Deed in lieu of foreclosure
The key is to take steps immediately once you realize you’re heading into trouble paying your mortgage. It can be scary and overwhelming, but getting help is essential. Speak with your lender directly and let them know what’s been happening. They may be able to hear your case. Financial counseling is also available from ACCC.
If you need more information about foreclosure, call ACCC today at 800-769-3571.