Checking Out your Financial Health Can Stop Foreclosures

By: philip smith

To those of you who have friends or family desperate to stop foreclosures and save their homes, there comes a time when you must think 'Could this happen to us?' Take some prudent steps right now to check out your ability to survive a financial crisis. Acting earlier than those already missing home loan repayments could prevent the loss of your home and all equity that you have managed to build up over the years, through price gains, loan principal repayments and your own hard work maintaining and upgrading the property.

In stable housing markets, even when price appreciation rates are modest, a motivated seller will be able to sell off the home within a predictable length of time at a price which, after allowing for agent's commission, repays the mortgage(s) in full, and provides some cash for a start over. Those facing difficulties now after a summer of downward price trends and rising rates of foreclosure filings have fewer options than their compatriots of a year, even 3 months ago. Fewer refinancing options as credit standards are tightened, far more sellers than wary buyers, and, personally, far less cash to spend on marketing the home to sell well.

The first signs of weak financial health will be evident if you have an adjustable rate mortgage due to reset, and you are already worried about your ability to meet the higher monthly mortgage payments. Have you any savings accrued for emergencies? If so, check out that the savings are of a level to meet a minimum of 2 to 3 months of the new level of loan payment. This buys you some time to start right now searching for the best deal to refinance your home. If not, take an immediate cold hard look at your expenditure and start economising rigidly. This may buy you some time while you start searching right now. Do you have a home equity line of credit (HELOC) in place? You pay little or nothing if you haven't been using your line of credit. This is really a rainy day fund that means you should never miss a home loan repayment!

Avoid missing that payment at all costs. Keeping your credit score at its current best level gets you the widest range of refinancing and debt workout options. Don't assume it helps your case to pay off other debts such as credit cards while letting the mortgage payment slide. Talk to your lender about refinancing or a workout plan before you use up all available cash paying other debts. The earlier the better, it's that simple.

Foreclosures
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