Foreclosure is a terrifying concept for any homeowner. Whether you’ve recently bought a home or have occupied your property for decades, foreclosure is one of the worst-case scenarios your credit could face. During a home foreclosure, mortgage and loan lenders seize the borrower’s property due to missed obligation payments.
Since foreclosure causes such immediate damage to a homeowner’s personal life and finances, all prospective property buyers must understand how to avoid foreclosure on their home. While making payments may seem simple, plenty of unexpected circumstances can lead to foreclosure without the right monitoring. To learn more about the most common cause of home foreclosure, continue reading the article below.
Most homeowners assume that avoiding foreclosure will be simple. As long as you pay your monthly payments and obligations, you have nothing to worry about. Easy, right? However, many homeowners do not anticipate how often unemployment can lead to a foreclosure.
For example, sudden changes in the job market and mass layoffs can often lead homeowners to a troublesome financial situation. If homeowners do not have enough savings to ease their transition into a new job, failed loan payments can add up fast. Avoid this nightmare as a homeowner by creating a savings fund specifically for this type of financial setback.
While you can take many precautions to avoid unemployment and other financial setbacks, unfortunately, divorce is often an unexpected, emotional, and financial setback. Divorce is one of the most common causes of home foreclosures for several reasons.
First, since divorce is such an emotional process, homeowners may forget and miss loan payments due to their emotional distress. Depression, anxiety, and other mental stresses can mess with a person’s priorities and distract them from other obligations. Second, divorce can be an expensive legal process. After lawyer fees, many newly single homeowners cannot afford to continue paying for their homes.
Credit Card Debt
If you have a history of letting your credit card bills accumulate, you’ll need to nip this behavior in the bud before becoming a homeowner. Credit card debt is a significant cause of home foreclosures. Since so many people accumulate debt, choosing between making a card payment or a mortgage payment can become a common and risky conundrum.
If you notice that you’re falling into credit card debt and struggling to make loan payments, consider applying for refinancing or forbearance options. There are several alternatives to foreclosure; however, you must contact your lender as soon as possible to discuss your financing options. The longer you wait and the more debt you accumulate, the less likely you will be to secure an alternative option to foreclosure.
When an accident, injury, or illness creates an unexpected and extreme stressor on your bank account, these obligations can often be the downfall of your mortgage payment plan. While it’s impossible to prevent unexpected future medical bills from happening, consider how you can bolster your savings account as a financial safety precaution.
Foreclosure is a nightmare for many homeowners. However, reviewing some of these common causes for home foreclosure can help prepare you for these potential financial stressors. It’s true that you can’t foresee or avoid every financial setback; however, creating a substantial savings account will help to alleviate any financial struggles in the future. The more you save and stay vigilant to the housing and employment market, the better your chances of being a successful homeowner will be.