Just like comedy, the key to maximizing your foreclosure options is all about timing. The earlier that you act against the forces losing your home, the more options that you’ll have. Here are 4 tips to prevent foreclosure at the most impactful period: before you buy your house.
1. Budget What You Can Actually Afford!
People work hard and everyone deserves marble finishes, 12 foot ceilings, and an in-ground pool. But not everyone can afford it? Before considering buying a house, run a thorough housing budget including your personal finances and goals. Compare current housing costs with those of a new mortgage. Include private mortgage insurance (PMI), property taxes, monthly upkeep.
So many homeowners forget the hidden costs of ownership such as capital expenditures for the inevitable leak in the roof, or the boiler that’s going to stop working one day? After figuring all of that, is there still enough left to pay all of the bills? Is there any money left to have a social life, or save for a vacation? After all, who wants a house that they can’t afford to leave?
2. Over-Finance
The second step you can take to prevent foreclosure before you buy is to over-finance! Simply put – set aside more money than you think you’ll actually need to save. Over-financing is easier in concept than in practice. If you’ve spent 6 months saving for something, saving for another three months could be the decision not that prevents a foreclosure down the line.
Over-financing doesn’t just account for the manageable defects that can occur with your house. Extra savings can also assist with a critical job loss, an emergency medical bill, or any other reasons that foreclosure occur. In short, if you’re not over financed for your home, then you’re probably under-financed.
3. Buy Smart!
A bad purchase is one of the biggest culprits of negative equity. Buying smart means two things: understanding the market to anticipate value trends and getting your property at the lowest offer possible. If you’re going to invest in an area, you can upgrade your due diligence.
Go online and find the town’s Master Plan. It’s a comprehensive document that towns usually draft every 8 years to outline different initiatives in the neighborhood including zoning, energy and housing. The master plan may also give you insights into undesirable changes coming to the area.
The second half of buying smart is buying low. If you’re not paying less than 80% of market value for your property, you’re leaving a lot on the table. The easiest way to do this is to make low offers to homeowners. You’d be surprised at how many people are willing to take significantly less than market value just to get rid of their homes.
4. Know Your Way Out!
The fourth tip for avoiding foreclosure before buying a home, is to have an exit strategy. No one wants to think about losing their home. In school, they perform fire drills to teach everyone what to do. No one anticipates the fire but there’s a plan in case there ever is on.
An example of a plan could be as simple as having 6 months of savings backed up, and then calling your lender as soon as hardship occurs. When it comes to an exit strategy, it’s better to have it and not need it, than need it and not have it.
It’s impossible to predict what’s going to happen in the future. And there’s no guarantee that foreclosure won’t happen if you follow these tips we’ve provided. But you’ll feel like an asset-protection genius if following even one of them saves your house.
For more information on how to prevent foreclosure, head to www.bluetowersfg.com or email us at info@bluetowersfg.com!
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