Foreclosure: How to avoid it (or find a good deal)

Jamie and I use USAA Federal Credit Union. They often have very good topics on their website that coincide with Dave’s teachings in Financial Peace University. Please take some time to read this. If you are not in jeopardy of loosing your house, you likely know someone who is. We need to spread the news about the principles you are learning in this class. As Sara Palin reminded us this past week in the VP debate, we need to take responsibility for our finances. We also need to ensure that we are not living beyond our means. Take some time and evaluate how much money you are actually spending on your “housing” budget items. If you are exceeding 25% you have too much house for your income and you need to do something to change that. Do not expect immediate results. It did not take anyone of us overnight to get in these financial situations and you will not get out of them overnight either.

Foreclosure: How to avoid it (or Find a Good Deal) Posted: 09/09/2008

The mortgage crisis. Tumbling home values. This one-two punch has backed lenders and borrowers into an uncomfortable corner. Economists predict that 2.5 million American homeowners could lose their homes to foreclosure in 2008, and the victims come from all income brackets.

Struggling with Mortgage Payments? In a recent survey conducted by the National Foundation for Credit Counseling, 10% of respondents report being late or missing a mortgage payment in the last year. Tough times prompt tough questions: Can you afford to stay? Can you afford to sell? Here are a few tips to avoid the financial and emotional damage of losing your home:

• Know your core homeownership costs. Do you have too much money tied up in your house? Most personal finance experts say your mortgage should not exceed 25% of your take-home pay. Add taxes, insurance and association dues, plus maintenance and repair costs, and you may be surprised at how much you have committed to your home.


• Put your mortgage under the microscope. Homeowners with adjustable rate and interest-only loans are at greatest risk. Ask your lender about converting your loan to a fixed-rate mortgage. If they balk, shop around. But remember, banks are nervous about mortgages these days, too. Even if your credit score is favorable, don't expect a great rate. You're not shopping rates, you're looking for a way to keep your mortgage from soaring to unaffordable levels.


• How low can you go? In popular neighborhoods where houses sold in a matter of days just a year or two ago, houses now sit on the market for months. If you're in a market where home values have declined and you're selling your home, expect buyers to demand deep price cuts.


• Think twice about borrowing. A home equity, consolidation or personal line of credit loan might get you current on bills if money's tight, but it's a temporary fix that will leave you with one more debt, adding to any financial strain you already have.


• Prioritize your spending. If you're the slightest bit uneasy, or if you've got big life events on the horizon — marriage, children, job change — get a handle on your finances. Separate the needs from the wants and build a cash reserve.


• If you can't keep up, get help. Ignoring collectors won't stop a foreclosure. The foreclosure process is expensive for lenders, so they usually want to help. The sooner you call your mortgage company, the better your options will be.

Nobody can predict when the market will stabilize. "None of us knows what the future holds," says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. Cunningham adds that using unconventional or less-than-legitimate methods to get out from under a crushing house payment isn't wise in the long term.

For those who suspect they're in trouble, Cunningham recommends meeting with a certified housing counselor or professional financial adviser to review options. "Consumers may only see one way out, a way that looks appealing at the moment, but the counselor can help them think long term."