With mortgage defaults composing many of the Texas bankruptcy cases, it’s important for homeowners to know how they can protect themselves from potential pitfalls. Falling behind on mortgage payments is one of the most common pitfalls that leads to bankruptcy. Fortunately, homeowners that catch the warning signs early can take actions to safeguard their finances and their house. Though financial times are uncertain, the housing situation for you and your family doesn’t have to be.
When Mortgage Problems Arise
When paying the mortgage becomes a struggle, it’s crucial to take action immediately to prevent falling into debt and the need for bankruptcy. The first step is to know exactly what type of mortgage you have. Knowing the terms of your contract will help you decide what moves to make next. Several mortgage types include:
- Hybrid Adjustable Rate Mortgages (hybrid ARMs). These are mortgages that have fixed rates for a set period of time before turning into adjustable loans. Because the fixed rate period will vary from hybrid ARM to hybrid ARM, check the terms of your contract if you have this type of mortgage.
- ARMs. Unlike hybrid ARMs, ARMs have adjustable rates as soon as the mortgage begins.
- Fixed rate mortgages. As the name implies, these mortgages have a fixed rate for the duration of payments. However, an escrow account with your loan creditor could create tax and insurance changes that would affect the fixed rate mortgage.
Once you determine the type of mortgage you have, you’ll have a better understanding of your terms and what you can do to avoid mortgage debt . Steps to take to avoid falling behind on your mortgage payments include:
- Regularly reviewing your budget. Perform a thorough audit to ensure that you and your family aren’t wasting unneeded cash on entertainment or eating out. Cutting a few dollars from various places can add up.
- Continue making payments. Even if you can’t pay the full mortgage, it’s always better to make a partial payment than to skip one. It shows a “good faith” effort and also keeps you from falling further behind.
- Prioritize debts. Chances are that you also have credit card debt and maybe even have student loans that you’re balancing. If this is the case, make your mortgage payments the priority and allow the others to take a backseat until you get back on track and are safe from a Texas bankruptcy.