Avoiding Foreclosure

When you are ready to purchase a home it isn't likely that you will be able to pull out your checkbook to cover the costs. If you are like most, you will need to approach a lender for a loan. The terms of home loans vary with circumstances, but a few things remain constant. Home owners must repay the loan or ultimately, risk foreclosure.

When you accept a home loan, you enter into a contractual agreement with the lender. The agreement will include repayment terms as well as remedies available to the lender in the event that you default or fail to repay the loan.

Foreclosure is among these remedies. Your home serves as collateral, and secures the loan. If you do not pay as agreed, the lender can seize the property. The good news is this does not happen immediately. Generally, foreclosure proceedings begin when delinquency extends beyond a period of two or three months.

Foreclosure is not reserved for deadbeats. Consider what would happen to your income and mortgage payment if you became ill, divorced or unemployed. Foreclosure can happen to anyone.

If you are facing financial trouble it is important that you communicate with your lender as soon as you become aware of the problem. Your lender cannot help you if you do not ask for the help you need. In most cases, the lender would like to avoid foreclosure proceedings as much as you would.

Your lender may be able to refer you to programs and services that are available in-house or within your community. Depending on your circumstances, you may qualify for emergency assistance from a local agency or church. Other options include forbearance or the negotiation of a repayment plan with your mortgage company.

The relief available to you will depend on your payment history and the circumstances surrounding your current inability to meet your mortgage obligation.

Before you agree to any arrangements, sit down with your budget to generate a realistic projection of what you can pay. You will create serious problems for yourself, and possibly even lose your home, if you do not honor the negotiated plan to cure the default.

Another more risky option involved further indebtedness, such as a home equity or personal loan. This option should be weighed very carefully in relation to your circumstances and the long term implications.

If you are not facing financial difficulties, now is the time to plan a proactive approach. The job market is ever-changing. Consider a workshop or certification training to keep your skills relevant and remain attractive to current and potential employers. Plan on your own, or with your credit union representative, to build a nest egg equal to at least six months expenses. If you ever need it, it's great to have a cushion.

The most important thing to remember is that ignoring the prospect of foreclosure will not make it go away. Work closely with your budget and your lender for the greatest chance of riding out a rough patch without losing your home.