Many homeowners around the country are facing the difficult prospect of losing their homes. In the month of August, national foreclosure rates were double that of last year. September saw a slight decline, but experts fear that this decrease was only a blip on the continuing fall of the national real estate market.
Why are so many people facing foreclosure? During the housing boom of the last couple of years, lenders gave out adjustable rate loans that started off with very low monthly payments. They also did not make sure that home buyers could afford to pay for their homes once these rates increased. Now that interest rates have gone up, many homeowners are unable to cover the costs.
Wooed by low interest rates and the constant media barrage of real estate news, people wanted to get in on the action. Not only was real estate going to be a great investment, but it was also a booming industry, and therefore something new and exciting to get involved with. Home buyers didn't do their homework in terms of checking out their lenders, and they went for the teaser rate loans. They did not budget for rainy days, or the eventual slow down of the real estate market. Now many of these people are in trouble, with seemingly little that they can do about it.
While hindsight is always 20/20, there are things that homeowners can do besides turn back time in order to prevent foreclosure. The owner must take steps to get their finances under control.
The first step is to contact your lender. Be forthright with them as soon as you experience financial difficulty. Tell them what the circumstances are that are making it hard for you to make your payments. Your mortgage lender is not in the business to watch you fail, so they should be willing to work out some kind of plan with you to avoid defaulting on your home loan. By approaching them right away in an honest manner, your lender will be more likely to trust you, and will be more flexible with their options.
Budgeting is the next step. Your lender may assist you in creating a budget that you and your family can live with. You will want to look at all of your monthly payments, and if possible, consolidate some of them. Every little bit helps. You may also be able to extend your mortgage period so that you have lower monthly payments. Again, your lender will the person to help you on this, so you want to be on their good side. Don't leave them in the dark!
You may decide to sell your home if you cannot reduce your monthly expenses to a workable amount. While the intention is to free you from high payments, the slowing real estate market is making it difficult for people in some areas of the country to sell their homes. Being stuck in an overpriced home is a place that no homeowner wants to find themselves in.
The last thing that you can do is to consider bankruptcy. This is your absolute last resort because it will destroy your credit rating for seven years or more, and make your life very difficult. Try your best to work with your lender, and any other creditors that you are dealing with before you choose this option. They want their money, so they will want to help as much as possible.