Avoid foreclosure on your home

In these tough times, losing your home to foreclosure can be a painful prospect, one that can be easily avoided if you have some basic information on how to prevent it. Here are some things you can do or avoid doing to prevent a bank or financial institution from foreclosing on your home. Remember that you need to take some of these steps before the real trouble starts, and some you can put in place right before the foreclosure auction.

1. First, try to put aside enough savings for emergencies. Every dollar you earn in the current economic climate can have a beneficiary in your name before it reaches your pocket, and saving anything seems almost impossible. However, as a homeowner, you must save enough to cover six months of mortgage payments. In the worst case, you need three months of mortgage payments in reserve.
2. Set up home equity lines of credit while you can. You’ll need it to stop foreclosure, but the options may disappear when you need them. A line of credit can prevent or delay foreclosure. These lines of credit often cost next to nothing, and fixed rates can be as low as 4%, with no monthly payments unless you actually access credit.
3. Try not to miss mortgage payments, which is the first step toward foreclosure. If you skip a payment, creditors will take it much more seriously than if you skip a utility bill or skip a credit card payment. It also makes it easier to skip more payments psychologically. It damages your credit rating, preventing you from getting a loan in time to avoid foreclosure.
4. Don’t ignore the lender. If you run into problems, let the lender know and give updates on progress. This is important, especially when your money problems stem from justified reasons like job loss or health problems. Acknowledge the problem and try to work out solutions with your lender. Act sooner for more options.
5. Don’t spend everything you have on bills. You will need funds at some point to reassure the bank and save your home. Pay that month’s installment, even if you’ve missed a couple before, and keep paying until the bank refuses to accept any. This assures the lender that you are trying to meet your commitments and that you intend to make the payments.
6. If all else fails, file for a Chapter 13 bankruptcy. This will stop the foreclosure process and keep you out of it as long as you meet the court-approved payment plan. File on time and make sure you make all payments according to plan.