When you purchased your home you undoubtedly did not think the day would come when your home would be repossessed or taken over. Yet, sadly so many home owners have met the fate of foreclosure. When a lender repossesses or takes over a home this is called foreclosure, the legal means of a lender protecting their rights.
It is estimated that 1.5 million homeowners will face foreclosure sometime this year
It is estimated that 1.5 million homeowners will face foreclosure sometime this year. The reason for the recent increase in foreclosures is the result of an increase and frequency of non-traditional mortgages. Types of non-traditional mortgages include variable interest rates, deferred interest payments, and balloon payments.
Lenders have been providing sub-prime homeowners, those with either bad credit or who don't qualify for the better rates, with complex non-traditional mortgage agreements which allow them to get into more home than they can afford. Typically such mortgage agreements begin with low payments for the first few years and then increase, sometimes dramatically, after the brief introductory low-interest period is over. This then leaves the sub-prime homeowners to face a monthly payment that may be higher than they can afford to pay. If you can't afford to pay your monthly mortgage payment, then you will most likely have late payments, missed payments, and penalties. After months of such activity the lender is forced to begin the process of foreclosure.
There is Hope
Even if you are stuck with a non-traditional mortgage loan as a result of poor lending practices, you may be fortunate enough to refinance your home loan
and qualify for lower interest rates. By refinancing and fixing your interest rates you will hopefully avoid a skyrocketing monthly mortgage payment and keep you from becoming a victim of foreclosure.
Improving your credit score also improves your chances of getting into a new fixed rate mortgage. The reason you had to get a variable rate mortgage in the first place was probably because the interest rates on a fixed rate mortgage were too high for you at that time with your credit standing. By repairing your credit
you may be able to get approved for a lower and better interest rate. Fixing your mortgage payments will help you save money and may be the key to avoiding a foreclosure.