Published on January 21st, 2017 | by admin0
Five Most Common Real Estate Mistakes that Lead to Foreclosure
When you decide to buy a house, the first thing you should be worried about is foreclosure. Regardless of your income, the location of your house or the people around you, foreclosure can happen. The fact of the matter is, foreclosure can be a painful experience, especially if happens when you are out of options.
Many homeowners who are affected try everything to get back their homes. Some of them succeed, and others fail. But whether you win or lose, the process can be stressing, costly and time-consuming. The only way to stay out of the trouble is to avoid the mistakes that can lead to foreclosure.
Here five common real estate mistakes many homeowners make that lead to foreclosure:
1. Taking out an adjustable rate mortgage
In the previous years, most lenders encouraged those who wanted to buy homes to take out adjustable rates hoping that they might get some pay raise in the months to come. In today’s world, that is the worst real estate mistake you can do, especially if you are buying your house for the first time.
Unlike the previous years, it is easy to lose a job or get your working hours reduced. If you want to avoid foreclosure, go for fixed rate mortgage simply because it comes with a fixed interest rate meaning you will only continue paying for what you agreed on initially.
2. Skipping months without paying a mortgage
Depending on how you buy your house, you might be required to make a payment every month. If you skip a month, it can be a great task catching up. Besides, how can you make a double payment if you couldn’t make one?
More often, the amount you are required to pay every month is almost half of your monthly income. Skipping one month might require you to use all your salary to fill the gap you left behind. Probably, you won’t be able to; especially you don’t have other income sources. So, as mentioned earlier, let the mortgage be your number one priority if you want to avoid foreclosure.
3. Not prioritizing a mortgage
Another mistake many homeowners make is wanting to spend lavishly forgetting the most important part of keeping their homes safe. Even if they are having trouble paying the mortgage, they will want to go to vacations, sign up for membership in some country club or engage in unimportant activities that take a lot of money.
In short, many homeowners will spend on a vacation, a car note, a club or a hobby that doesn’t generate money first before they think of their mortgage. Some even let a month or two pass, and that is where they get caught.
4. Buying a house when not fully prepared
Another mistake you can make is buying a house when you don’t have enough money in your bank account to cover other related expenses. For that reason, they end up getting into debts while trying to buy furniture and other home appliances. This problem is common with new buyers but will also affect those who are trying to move to new homes with new things.
To fully furnish their homes, they end up taking other loans on top of what they used to buy their houses. Point being, if you don’t have the money to buy the furniture already, you are better off not buying the house, especially if you are planning to take a second loan to furnish it.
5. No having an emergency cash reserve
More probably, banks will advise you to have money in reserve that can at least pay your mortgage for three months. Many homeowners don’t like doing this, but the truth is paying for a mortgage might require large payments that you might not be used to.
And the fact that you might still need to pay for other emergencies other than the mortgage, you might get stuck in the middle of a financial crisis. For that reason, you might end up skipping months or taking additional loans. Having some emergency cash in reserve means that you can take care of emergencies and still pay the mortgage without a sweat.
The fact is, paying the mortgage is one of the trickiest parts of owning a home. While buying a house will help you avoid paying rents in future, having to pay the mortgage every month will deny you a lot of opportunities. Since it might take half of your monthly earnings, you might not be able to live your life as usual, and that is where many homeowners get stuck.
No matter how bad you miss your country club experience or vacation with your friends, you should pay your mortgage first before you even think of your lavish life. The truth is, not all homeowners can live like this, and therefore they end up making the five mistakes mentioned above. The good news is, even when you lose your house you can always get it back by working hand in hand with a foreclosure attorney from Law Offices of Ronald D. Weiss.
The final words
Foreclosure is one of the many problems affecting homeowners and will affect you despite your income, the neighborhood you choose or the people you work with. The fact is, lenders will take the necessary steps to ensure that you stick to the agreement on how to make payments. While filing bankruptcy might help reduce the risks, avoiding these five mistakes will keep you safe at all times.