Avoiding Foreclosure - Are you Avoiding Foreclosure?

While foreclosure is often seen as a kiss of death of sorts to those who have bad credit, or even good credit, many people do not understand exactly why it is so very important to avoid foreclosure. Still others do not always understand what they can really do to avoid foreclosure. With options and guidelines that can help you as much as possible, there are things you can do but only if you take action to prevent a foreclosure.

Your first step to avoid foreclosure is to always carefully analyze your budget before you actually get a mortgage. This may sound silly, but taking on a mortgage payment you either know you cannot make, or think you cannot make is a sure recipe for disaster and will have you moving at a quick pace towards foreclosure. Never count on refinancing to help you afford later a home that you cannot afford now. Stick to a cheaper house that is within your budget and you are likely to have a much better chance of keeping your home.

Another step to avoiding foreclosure is to carefully read over the entire contract and all of the small print that accompanies it so that you know exactly what your rights and responsibilities are. If in doubt, ask questions and continue asking questions until you are perfectly clear and understand everything before you sign. Never sign until you understand everything and are satisfied. Never wait to ask questions after you sign; all questions should be asked before signing so you have the opportunity to back away quickly if things don’t seem to add up correctly.

While not everyone is required to be savvy in the law, it is advisable if you are a homeowner to familiarize yourself with foreclosure laws in your area. Even if you never intend to be involved in a foreclosure, knowing the protections and consequences ahead of time will help keep you motivated to make your mortgage payments on time, as well as help you to fight to keep your home should you go into default. Avoiding foreclosure is sometimes about education and planning, rather than merely making mortgage payments.

If any way possible you should also look into opening a savings account that you stock with enough money for at least 2, but preferably more, mortgage payments. The money in this account should never be touched for any reason except emergency mortgage payments. If you are in the process of looking for a house, consider making a smaller down payment to open and fund this account. Consider that the slightly higher mortgage payments will be well worth knowing that you have a sufficient supply of money in the bank to cover mortgage payments in the event of a serious medical problem, or even a severe financial crunch. Deducting $5,000 from your down payment to open the fund is not likely to affect your down payment enough that you will notice a difference each month, but it will provide you with ample cash to help prevent a foreclosure down the road.

Other ways to help avoid foreclosure is by always carefully reading any and all correspondence that your mortgage company sends you. They are not in the business to send you cutesy Christmas cards or even “Hi, how are you?” letters. They send you mail where there is important information that they need to pass along to you. Often reading this mail can help you discover and combat potential problems quickly. For example, before your interest rate goes up on an adjustable rate mortgage you should receive a notice from your lender letting you know what your approximate new rate will be as well as the approximate new payment you are looking at. Take this as a time to start looking at your budget and start planning. Tossing the letters into the mail might clear some clutter from your desk, but it could be a very costly mistake.

Another strategy for avoiding foreclosure is always staying in constant communication with your lender. The best way to do this is to try to develop a relationship with a specific person that you can always talk to when there is a problem. Simply calling your lender and pressing 1 for customer service can have you talking to numerous people; instead try to develop a relationship with one person and you are likely to get much better results when a potential problem is looming and you need their help. Personal relationships can sometimes be a huge help, and often you can work out satisfactory arrangements.

Some foreclosure specialists can make the process much smoother and make things happen faster. It can help to have someone working for you that knows the foreclosure process and that can take the actions necessary to help give you the peace of mind that your foreclosure can be avoided.