In this economy, it is more important than ever to stay ahead of your finances to avoid foreclosure. While most people don’t set out to end up missing a mortgage payment it can happen to anyone as a result of unforeseen circumstances. The good news is that you can take an active role in preventing a financial crisis by engaging in a few simple strategies.
Buy Within Reason
Many people make the mistake of buying a home that is at the top of their budget or loan approval range. While you may be able to afford such a monthly payment, it doesn’t mean that you should pay that much each month. The better way is to buy a home that you can afford to pay for each month plus set aside about 1% of the home’s value per year to cover the costs of maintenance, taxes or other related expenses.
Get The Best Loan
When shopping for a mortgage loan there are numerous options available, each with their own risks and benefits. A common trap people fall into is purchasing a home under a variable or adjusting interest rate. These are dangerous because they lead to unpredictability in monthly payment requirements and could leave you with a payment you can’t afford over time.
Save For A Rainy Day
Besides saving 1% percent of your home’s value per year to cover costs, it is important to have an adequate savings account that can cover expenses in the event you lost a job or source of income. Most people have less than $5,000 in their savings account, which is barely enough to cover essential living expenses for one month. The rule of thumb is to have enough in savings to cover three to six months worth of expenses, including the mortgage payment.