When financial hardship strikes there is no greater fear than losing your home to foreclosure. In many states, this threat can become real in a matter of weeks. While it isn’t always possible to avoid financial hardship from job loss or medical illness, there are ways to protect yourself from ending up in mortgage debt.
Prepare and Protect
One of the most overlooked aspects of mortgage debt prevention is buying within reason. The average home buyer applies for a loan approval before shopping for a home. This is often a slippery slope that leads to overspending on a home. Just because you are approved for a higher loan limit, doesn’t mean you can realistically afford to maintain that payment; especially when finances become tight. Take into account all of your expenses and keep your mortgage payment below 20% of your gross monthly income to avoid overspending on your mortgage loan. In other words, buy by the standard of your affordable monthly payment, not your preapproved loan value.
Another vital aspect to protecting yourself and your home is having an emergency fund in place. Financial experts recommend that you have at least three to six months worth of your total monthly expenses saved in an account for a rainy day. If you were to lose your job or ability to bring in income, this emergency fund could cover your costs for those months while you seek out a solution. If you don’t have an emergency fund, start by saving enough to at least cover the cost of your mortgage for up to six months and increase the savings from there.
If you still find yourself in need of help with your mortgage payment it is important you act quickly. Contrary to popular belief, waiting until after you have missed a mortgage payment to contact your lender for help can be a crucial mistake. Many lenders are willing to work with you to find a solution to your impending mortgage troubles if you make efforts to resolve your hardship before they lose any money. Even if you have already missed a payment, consult a Cincinnati bankruptcy attorney about your options for resolving mortgage debt and protecting your home.