Sorry to say that, foreclosures take place on a daily basis. However, it does seem like more of them have occurred within the last couple of years than in other times of American history. Due to the many modifications that have taken place within the world at large, there are those who feel like they will never be able to pay for the American dream of home ownership. However, do not permit the recent events to stop you from ever owning a home.
Although it has been almost impossible for some homeowners lately, this does not mean that you cannot minimize the likelihood that you will face foreclosure. Sure, some things you just cannot control. You don't know when your boss is going to fire the whole department and you can no longer pay your mortgage. Foreclosures are never easy to get over. But, you can take certain actions to reduce your chances of facing one.
Don't Get a Home Unless You Can Budget for it
Foreclosures would not happen if some people learned to live within a budget. Do not purchase a home that you cannot afford to pay for. Sure it is very easy to dream about having the best home that money can buy. But if you do not have the income to pay for your dream home, then you could find yourself in the middle of a nightmare. This might seem like a little thing to remember. Foreclosures exist because many people tend to forget about this one thing.
This might seem like common sense, but a lot of people will not pay attention to this warning. Within the last few years, the rules and regulations to get into a new home have been very relaxed. Some might argue this fact, but home loans are not as hard to get anymore. It used to be that in order to get approval for a home loan your credit had to be outrageously clean and you had to be at your current job for a long time.
Know that Regulations are Present for a Reason
But, some of these same soft rules caused plenty of foreclosures. Although we may not want to admit it, most rules are created for a reason. Bankers have applied mortgage formulas to determine who is ready for home ownership. Yes, it is hard to steer clear of rules such as these. But these formulas were adjusted somewhat for the purpose of helping people get into their first condos. This is most likely an idea that had more negatives than positives. This ultimately resulted in more foreclosures.
Opt for the Proper Kind of Loan
Were interest only home loans really an advantageous thing? In order to get more home for the money, many people chose these types of loans. This means that as opposed to paying a full monthly mortgage, the homeowner only had to pay the interest portion of their home loan. This exact amount was paid for the first five years of the loan.
This meant that payments were not as high. Home buyers preferred to use this home loan more than traditional ones during earlier years. However, once the five years was up, the mortgage payment was for the principle as well. The homeowner had a few choices which consisted of getting the loan refinanced, moving out of the home and selling it or paying the new extremely high house note. Many claim that this is the number one reason that foreclosures have drastically risen.
If the homeowner decided not to sell or refinance, he found himself paying double or triple of a monthly mortgage payment. For most homeowners, this new payment was very difficult to pay. Unfortunately, a lot of foreclosures existed across the country for this reason.
The bottom line is that you must do your homework so that you will evade foreclosure. Don't get approval for a loan that looks too good to be true. You should turn down creative financing when it comes to purchasing a home. Basically, not all creative financing techniques work. Stay within your means and get what you can afford. You will come out much better in the long run.
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