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If you've managed to escape America's housing meltdown over the past few years, consider yourself lucky. About one out of four homeowners in the U.S. is underwater, meaning they owe more on their mortgage than the home is worth. And sadly, millions of other homeowners are facing foreclosure -- and it's not always because they borrowed too much or made poor financial choices.
If you want to stay out of foreclosure, follow these three steps:
We all have a laundry list of financial obligations – from house payments to utility bills to food and clothing expenses. Throw in transportation, various kinds of insurance and the cost of raising kids and you can easily see how all those bills can really add up. No matter what debts you have, always think of your mortgage as top priority in terms of items to be repaid.
If push comes to shove, you can work out a deal with your cell phone carrier and pay that large, unexpected cell phone bill you received over a few months, but you never want to get behind on your mortgage. Pay your house note first. Next, put other debts such as credit cards, auto loans or student loans in order of importance. If you're delinquent on any of these debts it can hurt your credit – a fate you definitely want to avoid.
2. Establish a Cash ReserveHaving a cash cushion is vital for homeowners. Once you get into a house, having extra cash on hand to deal with emergencies or unanticipated events can mean the difference between making your house payment on schedule and being delinquent on your mortgage. If something happens that impacts your finances – like you lose your job or suffer an illness that leads to big medical bills – you'll be counting your lucky stars that you had the foresight to stash away some money for a rainy day.
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3. Avoid Last-Minute Negotiations
If you get behind, don't wait until the 11th hour, when you might be facing foreclosure; seek help immediately! Talk to you lender about getting a loan modification or a refinance. You'll need to have good credit and some equity in your home. Can't get direct help or straight answers from your lender? Then try two other options. Go to a HUD-certified housing counselor like NFDM (the National Foundation for Debt Management) for assistance. They can tell you about options for your specific situation or programs in your area. Also check out the government's housing rescue plan to find out if you're eligible for help. Go to http://www.makinghomeaffordable.gov for more info.
Have you already missed several home payments? Check out my other article called "Four Tips for Those Facing Foreclosure."
Comments: (1)
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By: Parag on 1/27/2011 5:22AM
Home foreclosure is a heart-wrenching process. If you are a real estate investor, you've got to think of this as a business transaction. It's easy to get emotionally involved, although you are often in a position to help the person going through the home foreclosure process by helping them get out with a little cash and no black marks on their credit.
http://www.financemetrics.com/foreclosures-on-homes/
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