Avoiding and Surviving Foreclosures

With home foreclosures on the rise, it’s hard for homeowners not to worry about the safety of their own home. This week, Tracy Davidson, consumer reporter for WCAU in Philadelphia, explains how to tell if your home is at risk for foreclosure, how protect your family from losing their home, and what you can do to recover your financial health if you’ve already had your home foreclosed on.

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Mortgage Woes

The numbers are astonishing! Month after month, thousands of homes are being foreclosed on. Each time I report the latest statistics, I know there are people behind those numbers, people who probably never expected to end up in such a financial struggle that they’d lose their home. So it’s a good time for all of us to make sure we’re taking some important steps to avoid foreclosure.

3 things you can and should do to avoid losing your home

  • Plan for the unexpected. Job loss, death or illness in the family are all situations that can throw your monthly budget off course, and when you aren’t prepared, bills spiral. Create an emergency fund: Experts say you should have the equivalent of at least 3 months of your salary saved.

  • Know how much house you can and cannot afford. Start by figuring out what your debt-to-income ratio is. Try this calculator. Look at your monthly gross income, before taxes and contributions. This is how much you make per month, not how much you take home. Then, make a list of all of your monthly debts: your mortgage payment (principal, interest, taxes and insurance), car payment, credit card bill, student loan—any bill you pay on a monthly basis should be on the list. Then take your total monthly debt payments and divide it by your total monthly income. This will give you your debt-to-income ratio. Experts say it should be no more than 36% of your monthly gross income. If your debt-to-income ratio is higher than this number, create a budget to get yourself there.

  • Take action at the first sign of trouble. If you find yourself in danger of missing or making a late payment on your mortgage, the single most important thing you can do is to call your lender right away! Discuss your options. The biggest mistake struggling homeowners make is doing nothing. Put any fear of embarrassment aside and pick up the phone. Get some support. Consider contacting a housing counseling agency for help. Or consider calling the Homeowner's HOPE Helpline at 888-995-HOPE.

After Foreclosure

If you’ve already lost your home to foreclosure, it probably feels like the end of the world to you, but it’s not. You can get back on your feet, learn from your mistakes and start fresh.

 

3 things you can do after losing your home to foreclosure

  • Review your credit report. By reviewing your credit, you’ll be able to see what needs your attention. You can get a free copy of your credit report once a year from each of the 3 credit bureaus by visiting annualcreditreport.com.

  • Rebuild your credit. This is extremely important, especially if you want to buy a house again someday. Get into the habit of paying all your bills on time every month. Keep low balances on all of your credit cards. Avoid opening new accounts or financing large purchases. Keep an eye on your credit report.

  • Create a financial plan. Set realistic spending goals and stick to your budget. More importantly, live within your means and be realistic about what you can afford.

We can all survive what’s happening around us. Remember, it’s your money. Set simple and realistic financial goals and then stay informed and stay committed!

Check out All That & More with Tracy Davidson.

Read more of Tracy's blog posts.

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