Having to foreclose on a home can be a negative experience. Not only can it be destabilizing, but it can also create feelings of loss and sadness, especially when you’ve invested so much in the property. In light of this, doing all that you can to protect yourself from the eventuality of one is important. As well as having the right knowledge about how the market works and what goes on behind the scenes, it’s also essential that you make smart choices too. Here is how you can protect yourself from foreclosure if you’re a homeowner or intending one.
Only Get What You Can Afford
One of the prerequisites of getting a robust mortgage loan is having good credit majority of the time. However, just because you have access to a $500,000 house via a mortgage, it doesn’t mean it’s necessarily something you’ll be able to quickly and easily pay off. Think about your long-term goals and when you’d like to be done with mortgage payments. This should be the determining factor on the maximum you’re willing to pay for a home.
Pay it Off Quickly
For those who already have a mortgage and those looking to get one, pay it off as quickly as you can. Always remember that minimum payments equate to more compounding interest as well as you having to pay a mortgage in the later years of your life. Think about how you can reduce your expenses and dedicate more of your income to reducing the amount you owe. However, be prepared to have to pay two or three times what you’re paying now which opens the door to the next suggestion.
Generate Extra Income
Following on from the last point, one of the most practical ways to protect yourself from foreclosure would be to generate extra income. You can’t guarantee that you’ll have the same job a year from now, and you know a downturn in finances puts you at risk of defaulting on your loan. If you’re looking for a way to generate income alongside your current employment, think about going into e-commerce on a small scale. In case you’re thinking about what to sell online, there is a range of products whether it be socks, Bluetooth speakers, or anything else that is in high demand.
Stick to a Budget
Budgeting is the best way to make sure that you don’t end up in foreclosure. Although you can’t always predict what unforeseen circumstances will hit you, what you can do is have enough set aside for a rainy day. To set and stick to a reasonable budget, review your expenses and cut out any unnecessary or exorbitant ones. Always stay focused on your end goal which is to pay your home off fully and have peace of mind in that respect.
Read the Fine Print
Before signing any mortgage documents that binds you in a contractual agreement, carefully read the fine print. Have a professional and experienced lawyer look over the said agreement to check for any ill intentions, loopholes, or potential traps. This is so important as once you’ve signed any documents, it becomes legally binding and getting out of it can be hard and expensive. Having said that, in the case that you do find that there’s a better deal out there later on along the line, you can try refinancing your mortgage alternatively to get better rates and cut your debt in sometimes half.
The millions of people that have foreclosed on a home can probably tell you what an unfortunate experience it is. However, it doesn’t have to be your story if you try and live within your means and plan for a rainy day.
Couple Items I would like to add.
Don’t buy more house than you need, if you can afford $2,200.00 a month, but knowing you would be better at $1,700.00 a month – What you don’t want is to become a Prisoner of your own home. go with a lower payment. What we forget is the “Other” stuff that pops up. Wood Rot, broken window, or the hot water heater is on the blink. the incidentals that “Just Happen”.
and one other item I would suggest a Whole life insurance policy, you ask why. Very simple, as you put money into your buckets you are able to use later down the road “In Case Of” something happening. It what some of us call “Become Your Own Bank” from Nelson Nash wrote a book explaining how you can use YOUR money for everything from retirment, buying of cars, to fixing the house. and its Your money. another is called Infinite Banking~! Watch the videos learn and please feel free to give me a call.
I have included an 8 minute video: