Protecting Your Home

In my many years defending distressed borrowers, I witnessed common trends between homeowners who face foreclosure. Ironically, most distressed homeowners produce conditions that lower their chances of keeping their property once an economic recession starts revealing its teeth.  From debt management to payment planning, homeowners must take a variety of steps to protect the ultimate investment, their home.

First, homeowners must maintain limited debts.  Credit cards usage must be limited to absolute necessity.  Homeowners are advised to maintain no more than three credit cards.  Store charge cards can be used seasonally, but with extreme conservational attitude.

Second, homeowners need to plan for the unexpected.  Every year, homeowners must put aside the equivalent of 2% of their properties original purchase price.  Those funds can be used to make emergency repairs – not extensive upgrades – or to make payments in case income is temporally decreased.

Third, homeowners should never engage in large purchases within their first three years.  Unfamiliar to most homeowners, spending attitude can and will be used against themselves by their lenders in a court of law.  In addition, the first three years are the most risky because almost the whole monthly payment is directed towards interest and lending costs.

Fourth, record keeping is essential for homeowners.  Tragically, many homeowners lose track of important documents.  Important documents include original copies of property’s purchase agreement, mortgage coupon, deed of trust, copy of the appraisal and payment receipts for any upgrades.  For this problem, I recommend every homeowner to invest in a scanner.  Once obtained, homeowners can make digital copies of all their important documents and start organizing them accordingly.

Also, many distressed homeowners are afraid to talk with their lenders.  It can never hurt homeowners to contact their lenders in case they are experiencing some financial difficulties forcing them to miss a payment.  Most lenders have forbearance agreements that can afford borrowers to extend their payment deadline by a week or two.  Beware: homeowners should never make a habit of this practice.

Finally, there are many different steps that homeowners can take to protect their ownership.  Foreclosure is not a must; rather, foreclosure is a combination of poor planning and legal conflict.  Safeguard your property by keeping debt low, maintaining an emergency savings account and following lawful guidelines in association with sound future planning.