Updated: Jul 13, 2020
Home ownership is a top priority for most people. However, an economic downturn, poor financial management and job loss can prevent consumers from turning this dream into reality.
Home ownership is a top priority for most people. However, an economic downturn, poor financial management and job loss can prevent consumers from turning this dream into reality. To improve your chances of successfully paying off your mortgage, you should buy a home that you can afford. Furthermore, you should arrange your personal finances to ensure you have enough cash at the end of the month to make your mortgage payments. If you start experiencing difficulty servicing your mortgage, you should take steps to avoid having your home repossessed by the bank.
How To Avoid Foreclosure And Repair Your Credit
i) Prioritize Your Mortgage Payments
The cost of living is always rising and incomes have stagnated. This means that you must learn to prioritize your expenses to ensure you enjoy financial stability. In this regard, your mortgage should be your top priority. Whether you get a weekly, biweekly or monthly income, you should make sure your mortgage is paid before you spend your money on anything else. In addition to preventing foreclosure, this will also improve your credit rating as your lender is required to report both your timely and late payments, if any.
ii) Live Within Your Means
Living within your means is the most important principle in personal finances. However, most people tend to forget or overlook this rule, and this is what often leads to financial problems. You cannot charge your credit card whenever you see something you like or go out for lunches and dinners that are beyond your financial reach. Ideally, you should have a budget to help you spend your money. This will prevent you from overspending on certain items and have to sacrifice on others. In your budget, your mortgage, car payments, personal loans and groceries should be on top of the list. Any savings you make should be kept in a separate account for emergencies.
iii) Get Help Early
If you make late payments consecutively due to financial problems, you should not wait until you are in default before you seek help. There are many organizations that offer credit counseling. In fact, your bank might have a credit counseling program for their customers. By getting help, you will be able to avoid foreclosure and get a chance to start repairing your credit.
If your mortgage payments have become unaffordable due to increased financial commitments, you should consider refinancing. This is to increase the repayment period and reduce your monthly payments. This will make it easier for you to service the mortgage.
v) Get Rid of Your Mortgage
If you are already in default and the lender has issued a notice of default, there is one thing you can do to avoid foreclosure. That is to make up for the missed payments within the allowed period. If you do not, the lender will take steps to repossess the property. If you live in a judicial foreclosure jurisdiction, you will have up to a year to pay off your mortgage and get full ownership of your home. At this stage, your best bet for avoiding foreclosure would be to have a short sale. You can list your property on short sale listings and identify the most suitable buyer. Once you have an offer, you will have to seek approval of your lender. If they approve the transaction, your lawyer will help you close the transaction. While you will lose your home, you will also avoid foreclosure and get a chance to start the process of repairing your credit.
REALTY PhD prides itself in finding the best solution for your situation. We would be glad to discuss options with you. You may even end up with cash. No obligation. Please give us a call at 202-909-1201.