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Home › Articles › Home Matters › Foreclosures

Foreclosures

What to Do If It Happens to You

By Shel Franco

Pages:  1  2  3  4  5  6  7  

Your first house shouldn't be your dream house; it should be a starter house, he says. "You will own three to four homes in your life and each one should be a step up from the one before," he says. "It should be in an area that you think will go up in value, and you should plan on staying there for five years." Ask yourself if you really need top appliances, or to put in a pool. "Stop spending on things that are not a necessity and get back to a budget."

When buying or refinancing a home, Housser suggests the following:

  • Create a budget and don't stretch yourself too far. Unexpected things can and do happen to millions of Americans each year – reduced income, medical expenses, car accident, divorce. Build a detailed budget of your income and expenses. Determine what are essential expenses (heat, water, food, gas) and what are unessential (entertainment, travel). Make sure you have some breathing room so that if something unplanned does occur, you will be able to weather the downturn for a few months and keep your home.
  • Be careful when considering adjustable rate mortgages (ARMs). More people than ever have been entering into ARMs in order to buy homes that are more expensive than they can afford. Interest rates on ARMs start off considerably lower than those on fixed-rate loans, and can lure you into a home beyond your means. Unfortunately, these ARMs typically carry the low introductory rate for only three to five years. After this time period expires, the interest rates, and thus payments, can jump significantly. If you can barely afford the payment on your ARM, then you are asking for trouble in a few years. Adjustable rate mortgages can be useful, however, if you are planning to move within the three- to five-year period, before the rates start adjusting. But if this is not the case, use caution.