Top Tips to Prevent Foreclosures

In the current housing market, with multiple borrowers defaulting on subprime mortgages and foreclosures climbing, it’s only natural for homeowners to be concerned about the security of their own home. A little bit of worry about foreclosure is healthy, if only because it reflects an understanding of the steps homeowners must take to make sure that the home they worked so hard to acquire remains in their possession.

Preventing Foreclosure Tip No. 1 -- Make Your Mortgage Payments

This is the single most important step in avoiding foreclosure. If you make your payments in full and on time for the life of the loan, you will never be foreclosed upon. If you have to reorganize your budget or delay bills, paying your mortgage should always be your first priority. As soon as you are late or miss even one payment, the situation can begin to snowball and get away from you.

Preventing Foreclosure Tip No. 2 -- Only Get a Mortgage You Can Afford

Part of the reason for the subprime mortgage crisis is that people were taking advantage of low introductory rates to get loans that they couldn’t really afford. Be honest with yourself about how much money you can realistically afford to borrow. A “buy now, worry later” mentality has a high chance of ending in disaster.

Preventing Foreclosure Tip No. 3 -- Understand Your Mortgage

Be sure you have spoken thoroughly with your mortgage broker and that you understand all aspects of how your mortgage loan works. For example, some mortgage loans have a balloon payment at the end. What this means is that your affordable rate and monthly payments may be due to the fact that your mortgage will not be paid off in full at the end of the term.

In these cases, a large balloon payment is required to make up the difference. There are many ways to handle that balloon payment, but if you don’t have a plan for doing so, it could mean trouble.

Preventing Foreclosure Tip No. 4 -- Communication

Keep an open line of communication with your mortgage broker from start to finish. Don’t be afraid to voice your concerns and discuss options. Your mortgage broker is there to help you.

The lending agency does not want to foreclose on your home. They are in the business of making loans, not selling houses. If you let your lender help you, you have a much better chance of keeping your home in your own hands, where it belongs.